ARIAS Quarterly 2nd Qtr 2014

SECOND QUARTER 2014

VOLUME 21 NUMBER 2

INSIDE…

New and Notices

OPINION: Code of Conduct:A Focus on Guiding Principles or Rules of Behavior?

Members on the Move

REPORT: ARIAS•U.S. 2014 Spring Conference

Law Committee Report

IN FOCUS: Recently Certified Arbitrators

2nd Qtr. 14_2nd Qtr 14 6/13/14 2:01 PM Page 1

Happy Anniversary! To us! Starting with the 2014 Spring Conference, we commence thecelebration of the twentieth anniversary of the founding of ARIAS•U.S.

With 20 years of having provided a fair and neutral forum for the resolution of disputes,ARIAS•U.S. has much to celebrate. What makes ARIAS•U.S. attractive is a knowledgeablegroup of arbitrators with a solid commitment to ethical standards. How to maintain thiscommitment, how to burnish our crown jewel, if you will, is something that can never betoo far from our minds. In a thought-provoking article, Richard Waterman argues thatethics are best maintained by a focus on general precepts and intensive training, ratherthan on specific rules dealing with specific situations. The Quarterly welcomes opinionsfrom other members on this subject, either in the form of a full article or as a “letter tothe editor.”

In previous issues of the Quarterly (most recently in the Second Quarter of 2013 andFourth Quarter of 2012) we’ve published articles addressing the power of arbitrators torequire pre-hearing security. But why shouldn’t the parties eliminate wrangling oversecurity and get directly to the crux of their dispute? One setting in which the questionof security arises is fronting. In this issue of the Quarterly, Larry Ruzzo suggestsaddressing security in fronting agreements before disputes arise and offers practical tipsfor drafting those agreements.

In a Law Committee report illustrating one of the major differences between arbitrationand litigation, Rob Kole summarizes the recent case of Eagle Star Insurance Co. v.Arrowood Indemnity Co., where the court ruled that confidential arbitration informationfiled under seal as part of a petition to confirm an award should be unsealed because ofthe presumption of public access to judicial proceedings.

Finally, with this issue, the editorship of the ARIAS•U.S. Quarterly transitions from the lateGene Wollan to me. Gene was a true gentleman, admired by all for his proverbial wit,grace, and charm, all of which he possessed in abundance. An expert dialectician andgrammarian, Gene took pride in ascending to his pulpit in the Quarterly to offer alearned discourse on such topics as his literary Ten Commandments and the misuse ofwords such as further/farther and fewer/less. To follow in his footsteps would be a tallorder, which I won’t even pretend to fill. In the words of a cigarette commercial way backfrom the days of Mad Men: “What do you want, good grammar or good taste?” I offerneither but I can promise that I’ll try my best to maintain the Quarterly in a manner thatwould make Gene proud — only less grammatical.

With that out of the way, allow me to introduce myself. I began my career in the industrybefore I knew better at seven years old, serving as an envelope stuffer, stamp licker, andgeneral factotum in my family’s insurance business in Brooklyn. From there I waspromoted to positions of increasing responsibility until I left to become a messenger boyfor a broker on Nassau Street in Manhattan, delivering and picking up importantdocuments at insurance companies, most of which have ceased to exist. My first positionwith an insurer was as an underwriting trainee, where I came to specialize in loss-making business. Luckily I departed to attend law school before my loss ratio becameknown. It was as a lawyer that I first became involved with CNA, for which I eventuallywent to work. Back then, CNA was a conglomerate owning such unrelated businesses asa home builder, a consumer finance lender, a mutual fund, and one of the country’s firstcable TV networks. My law firm successfully represented CNA in a dispute with dissidentdirectors of the network, who surreptitiously acquired the company’s debt, attempted toforeclose on it, and, for icing on the cake, walked away with all of its technology.Afterwards, CNA offered me a job and there I stayed for nearly a quarter of a century,

EDITORIAL BOARDEditor Thomas P. [email protected]

Associate Editors Peter R. [email protected]

Susan E. [email protected]

Mark S. [email protected]

Daniel E. Schmidt, [email protected]

Teresa [email protected]

Managing Editor William H. [email protected]

International EditorsChristian H. [email protected]

Jonathan [email protected]

Ex-Officio Jeffrey M. RubinEric S. KobrickElizabeth A. Mullins____________________Production/Art Director Gina Marie Balog

VOL. 21 NO. 2SECOND QTR. 2014

editor’scomments

The ARIAS•U.S. Quarterly (ISSN 7132-698X) is published Quarterly, 4 times a year byARIAS•U.S., 131 Alta Avenue, Yonkers, NY 10705.Periodicals postage pending at Yonkers, NY andadditional mailing offices.

POSTMASTER: Send address changes toARIAS•U.S., P.O. Box 9001, Mt. Vernon, NY 10552

ARIAS•U.S.P.O. Box 9001Mt. Vernon, NY 10552914.966.3180, x112914.966.3264 [email protected]

Thomas P. Stillman


Editor’s Comments Inside Front Cover

Table of Contents Page 1

FEATURE: A Perfect Front – Securing the Ceding InsurerBY LORETO J. RUZZO Page 4

News and Notices Page 8

OPINION: Code of Conduct: A Focus on Guiding Principles or Rules of Behavior?BY RICHARD G. WATERMAN Page 9

Members on the Move Page 13

REPORT: ARIAS•U.S. 2014 Spring ConferenceBY BILL YANKUS Page 14

Law Committee Case Summary Page 22

IN FOCUS: Recently Certified Arbitrators Page 23

Invitation to Join ARIAS•U.S. Page 26

Membership Application Inside Back Cover

ARIAS•U.S. Board of Directors Back Cover

contentsVOLUME 21 N UMBER 2

3 P A G E

Editorial PolicyARIAS•U.S. welcomes manuscripts of original articles, book reviews, comments, and case notes from our membersdealing with current and emerging issues in the field of insurance and reinsurance arbitration and dispute resolution.All contributions must be double-spaced electronic files in Microsoft Word or rich text format, with all references andfootnotes numbered consecutively. The text supplied must contain all editorial revisions. Please include also a briefbiographical statement and a portrait-style photograph in electronic form. Manuscripts should be submitted as email attachments to [email protected] .Manuscripts are submitted at the sender's risk, and no responsibility is assumed for the return of the material. Materialaccepted for publication becomes the property of ARIAS•U.S. No compensation is paid for published articles.Opinions and views expressed by the authors are not those of ARIAS•U.S., its Board of Directors, or its Editorial Board,nor should publication be deemed an endorsement of any views or positions contained therein.

Copyright NoticeCopyright 2014 ARIAS•U.S. The contents of this publication may not be reproduced, in whole or in part, without writtenpermission of ARIAS•U.S. Requests for permission to reproduce or republish material from the ARIAS•U.S. Quarterlyshould be addressed to William Yankus, Executive Director, ARIAS•U.S., P.O. Box 9001, Mount Vernon, NY 10552 [email protected] .

finally leaving corporate life toenter into the wonderfulworld of arbitration full time.Like Gene, I have many strongopinions, but other than apassing interest indistinguishing “different from”from “different than,” I havefew grammatical passions.Now, when it comes tofinding my next meal, wellthat’s a different story but notone to dwell on here.

The Quarterly is not theproduct of the Editor or eventhe Editorial Board. Thepublication is what you, themembership of ARIAS•U.S.,make it. That pretty welltelegraphs what’s comingnext: a plea for articles. Weinvite each of you to submitan article, which you, yourself,would find valuable,interesting, and worthwhile toread. We’re going to aim forsubmissions that will run 3 to5 pages in the Quarterly. Eachprinted page equals twotyped double-space ones. Solet the floodgates open andthe articles flow forth. Theplace to send articles,comments, or anything else ofvalue: [email protected].▼

editor’s commentscontinued from inside front cover


P A G E 4

Loreto J. Ruzzo, Esq.

OverviewHistorically, regulators have taken ajaundiced view of admitted insurancecompanies fronting for an unlicensedreinsurer. When an admitted companyagrees to issue policies with the intent tocede 100% of the risk to a non-admittedentity, regulators have a legitimate interestin evaluating the fronting arrangement’simpact on the issuing company’s solvency.iThis article describes methods of securingthe reinsurer’s obligation to indemnify theissuing carrier against losses on the frontedpolicies, thereby ameliorating some of theconcerns over fronting. Creating self-helpremedies for the issuing company alsochanges the dynamic of current arbitrationpractices in resolving disputes amongadmitted and non-admitted insurers.

BackgroundFronting provides a method of originatingpolicies in a jurisdiction in which theultimate risk bearer is unable to providepolicies that meet the requirements of itsinsureds. For example, an offshore captivewishing to assume the risks of its owner ora risk retention group (“RRG”) intending toassume the risks of its members may nothave the requisite ratings to issue policiesthat satisfy entities doing business withthose insureds. In such instances thecaptive or RRG can contract with anadmitted company of sufficient financialstrength to issue policies on the conditionthat all risk of loss will be transferred to thenon-admitted entity.

From the issuing company’s perspective,fronting offers an opportunity to earnrevenue in the form of ceding commissions(and claims handling or other fees) withoutrisk of underwriting loss. Credit risk,however, remains a principal concern of theissuing company whenever it undertakes to

front for a non-admitted reinsurer.

Total elimination of risk may prove elusive.When the ultimate risk bearer becomesinsolvent or otherwise fails to indemnify theissuing company for ceded losses, the issuingcompany remains liable to its directpolicyholders while being unable to claimcredit for reinsurance as an asset on itsbalance sheet. To avoid the prospect ofsuffering a reduction in policyholder surplus,the issuing company must obtain security tosupport the reinsurer’s obligation toindemnify it on fronted policies.

Security for LossesUsing New York law as a model, issuingcompanies may take advantage of severalmethods to protect their balance sheetsagainst risk of non-payment by the non-admitted reinsurer. The most common ofthese are:

• Requiring the reinsurer to post collateral inthe form of a Regulation 114 Trust; or

• Requiring the reinsurer to supply a clean,irrevocable letter of credit from anacceptable bank.

Either of these devices must allow theissuing company to draw immediately (andwithout unnecessary conditions) anyindemnity payments owed but unpaid bythe reinsurer. The amount of security shouldequal outstanding loss reserves establishedby the ceding company on covered policies,including any incurred but not reported(“IBNR”) losses where the issuing company isrequired to post such reserves on its balancesheet.

A third tool to protect the issuing carrierexists whenever the reinsurer seeks toretrocede a portion of its assumed losses toa retrocessionaire. In these instances, theissuing company must secure beforehandthe right to approve or reject the proposedretrocessionaire. The ceding company mayalso condition its approval on securing a cut-through endorsement in the retrocession

ARIAS•U.S. QUARTERLY - SECOND QUARTER 2014

feature

Loreto J.Ruzzo, Esq.

Loreto J. (“Larry”) Ruzzo is a New York-li-censed attorney and the principal in anindependent consulting practice. Heoffers ADR services for all lines of com-mercial property & casualty insuranceand reinsurance.

A Perfect Front —Securing the Ceding Insurer

When an admittedcompany agrees toissue policies withthe intent to cede100% of the risk toa non-admittedentity, regulatorshave a legitimateinterest in evaluatingthe frontingarrangement’simpact on theissuing company’ssolvency.


5 P A G Eagreement that will enable the cedingcompany to proceed directly against theretrocessionaire in the event the non-admitted reinsurer becomes insolvent.

Drafting AgreementsThe rights and responsibilities of parties toa fronting arrangement should beembodied in a program or “umbrella”agreement that clearly specifies the roles tobe played by the issuing company and theultimate risk bearer.ii At a minimum, theumbrella agreement should specify:

- The type of policies to be issued,including scope and limits ofcoverage, required exclusions, etc.;

- Eligibility and premium ratingcriteria for insureds, as well asidentification of the party thatmay exercise underwritingauthority;

- Claims handling authority, withrequirements to notify thereinsurer of case reserves orsettlements that exceed athreshold established by thereinsurer;

- Compensation paid to the issuingcompany, whether in the form ofceding commission, underwritingor claims handling fees; and

- The parameters of an acceptable100% quota share reinsurancetreaty, including the securitydevices demanded by the issuingcompany and an arbitrationclause broad enough toencompass any disputes arisingunder or related to the programagreement.

Thus, while an umbrella agreement maygive the issuing company rights against theultimate risk bearer that are broader thanthe traditional cedent / reinsurerrelationship, it should maintain arbitrationas the exclusive form of dispute resolution.iii

The required security devices may beembodied in the program agreement ordrafted into the reinsurance treaty itself. Ifmade part of the reinsurance contract, astandard “Unauthorized Reinsurer” clausemay be used to model the ultimate riskbearer’s obligations.

One such clauseiv might read:

The Ceding Company shall forwardto the Reinsurer no less frequentlythan once per calendar year aStatement reflecting the reserves setup on its books in respect of policiescoming within the scope of thisTreaty, including, where required,reserves for losses incurred but notreported. The Reinsurer agrees tofund such reserves within thirty (30)days by delivering to the CedingCompany a clean, irrevocable andunconditional Letter of Credit issuedby a bank and containing provisionsacceptable to the insuranceregulatory authorities havingjurisdiction over the CedingCompany in an amount equal to thereserves reflected on the CedingCompany’s Statement.

The better practice would be to have thereinsurer establish a Regulation 114 Trustbefore the issuance of any fronted policies.Regulation 114v requires, inter alia:

(a) The agreement must be in theform of a trust agreement madeand entered into among the bene-ficiary, the grantor and a bank…

(b) The trust agreement must createa trust account into which assetsshall be deposited.

(c) All assets in the trust accountmust be held by the trustee…

(d) The trust agreement must beclean and unconditional, in that:

(1) the trust agreement muststipulate that the beneficiaryshall have the right towithdraw assets from thetrust account at any time,without notice to the grantor,subject only to written noticefrom the beneficiary to thetrustee;

(2) no other statement ordocument need be presentedin order to withdraw assets,except the beneficiary may berequired to acknowledgereceipt of withdrawn assets;

(3) the trust agreement mustindicate that it is not subjectto any conditions orqualifications outside of thetrust agreement….


Thus, while anumbrella agreementmay give the issuing

company rightsagainst the ultimaterisk bearer that are

broader than thetraditional cedent /

reinsurerrelationship, it

should maintainarbitration as theexclusive form of

dispute resolution.


P A G E 6(e) The trust agreement must be

established for the sole use andbenefit of the [cedin company]...vi

Where a Regulation 114 Trust is created, thereinsurance treaty should provide that anypremium ceded to the Reinsurer (net ofceding commissions):

…shall first be deposited into theTrust established pursuant to NewYork State Insurance Regulation 114by the Reinsurer with XYZ Bank asTrustee and Ceding Company asBeneficiary until the corpus of theTrust shall equal the reserves set upon the books of the CedingCompany in respect of policiescoming within the scope of thisTreaty, including, where required,reserves for losses incurred but notreported. If, and to the extent that,premiums collected in respect ofpolicies coming within the scope ofthis Treaty exceed the reserves set upon the books of the CedingCompany in respect of the policies,such premiums (net of cedingcommission) shall be paid to theReinsurer, provided however that theReinsurer shall be required tomaintain the corpus of the Trustequal to the amount of theoutstanding reserves on the policies.

Similarly, the Treaty should also provide thatindemnity payments owed to the CedingCompany may, immediately upon becomingdue, be withdrawn from the corpus of theTrust, provided that the Reinsurer remainsobligated to increase the corpus of the Trustto the level of reserves set forth in theperiodic Statement of the Ceding Company.

Restrictions on retroceding any portion ofthe losses assumed by the reinsurer shouldbe embodied in the program agreement toensure that the issuing company retains theright of prior approval for anyretrocessionaire selected by the reinsurer, aswell as the option to require that theretrocession agreement contain anappropriate cut-through endorsement.Although not enforceable in everyjurisdiction in which the initial reinsurermight be regulated, the presence of a cut-through endorsement could serve to placethe fronting insurer on the same footing asother policyholders of the insolventreinsurer and ahead of its generalcreditors.vii

A typical cut-through endorsement for theretrocession agreement might read:

In the event the Reinsurer is declaredinsolvent and is unable to pay anyLoss under the Reinsurance Treatyentered with Ceding Company,Retrocessionaire will become liable tothe Ceding Company for its portionof such loss, and will make payment directly to the Ceding Company,subject to the terms, limits andconditions contained in theReinsurance Treaty. TheRetrocessionaire shall be subrogatedto all rights of the Ceding Companyagainst the Reinsurer to the extent ofsuch payment.The Ceding Company will have adirect right of action against theRetrocessionaire for amountspayable under the ReinsuranceTreaty.

Implications for ArbitrationAs should be obvious, the various securitydevices described above are designed toensure that the issuing / ceding companyencounters minimal or no delay inrecovering indemnity payments owed onclaims paid pursuant to fronted policies. Inthe case of the Regulation 114 Trust,indemnity for losses and ALAE may bewithdrawn at the instigation of the cedingcompany as soon as it pays losses or defensecosts on underlying claims. Under the Letterof Credit method, the ceding company mustgenerally make a demand and await adefault in the reinsurer’s payment ofindemnity before proceeding to draw on theLOC bank. In neither instance does paymentdepend on an affirmative act of the reinsurerto transfer funds to the ceding company.

Thus, unlike the situation in which areinsurer denies payment on claims andrequires the cedent to arbitrate its recoveryof indemnity, disputes under securedfronting arrangements would rarely, if ever,begin with a request for pre-answer security.As practitioners in reinsurance arbitrationknow too well, requests for pre-answersecurity often divert arbitrations into civillitigation and defeat the principal reasonparties chose arbitration in the first instance.

Disputes under secured frontingarrangements will more likely be initiated bythe reinsurer to recover funds it alleges wereimproperly drawn under the LOC or


Thus, unlike thesituation in which areinsurer deniespayment on claimsand requires thecedent to arbitrateits recovery ofindemnity, disputesunder securedfrontingarrangements wouldrarely, if ever, beginwith a request forpre-answer security.As practitioners inreinsurancearbitration know toowell, requests forpre-answer securityoften divertarbitrations into civillitigation and defeatthe principal reasonparties chosearbitration in thefirst instance.


7 P A G E


Secured frontingarrangements offerbenefits to both the

issuing / ceding companyand the non-admitted

reinsurer. Cedents maysecure multiple streams

of revenue, whileminimizing the likelihood

of suffering anunreimbursed

underwriting loss. Thenon-admitted reinsurer

stands to collectunderwriting profit on anappropriately priced book

of assumed business,albeit with somewhathigher administrative

costs than if the reinsurerhad issued the fronted

policies directly.

withdrawn from the Regulation 114Trust. However, because the reinsurertypically secures for itself greatercontrol of claims handling andsettlements through the programagreement, the likelihood of disputesover improper drawing of security isgreatly diminished. An exhaustivereview of published cases has yet toreveal a single instance in which areinsurer’s claim of improperwithdrawal of security by the fronting /ceding insurer has escaped the ADRprocess and brought the parties tocourt.viii

ConclusionSecured fronting arrangements offerbenefits to both the issuing / cedingcompany and the non-admittedreinsurer. Cedents may secure multiplestreams of revenue, while minimizingthe likelihood of suffering anunreimbursed underwriting loss. Thenon-admitted reinsurer stands tocollect underwriting profit on anappropriately priced book of assumedbusiness, albeit with somewhat higheradministrative costs than if thereinsurer had issued the frontedpolicies directly. Both parties benefitfrom the speed and convenience ofarbitration as a dispute resolutionmechanism, with a greatly reducedlikelihood that their proceedings willbecome bogged down in litigation overpre-answer security.

Notesi Fronting has also been challenged as an im-

proper attempt to evade statutes prohibiting theunauthorized practice of insurance. See, e.g.,New York Insurance Law Section 2117 (McKinney’sSupp. 2014). This article does not address the ap-propriateness of fronting generally, because it isbased on situations in which the non-admittedreinsurer may lawfully issue direct policies butchooses not to do so.

ii In drafting the agreements, the ceding com-pany’s attorneys should also be aware of NewYork Insurance Law Section 1308(e)(1)(A), whichrequires a domestic non-life insurer to submitto the Superintendent for prior approval anyagreement in which the insurer cedes reinsur-ance premiums in excess of half “of the un-earned premiums on the net amount of itsinsurance in force…” Fortunately, the Office ofGeneral Counsel has taken an expansive view ofSection 1308(e)(1)(A) by stating that prior ap-proval is only necessary for agreements thatcede more than half of the unearned premiumfor the totality of the domestic insurer’s policiesin force across all lines written by the domesticcarrier. See, e.g., OGC Op. No. 10-3-02 (March 5,2010). In any event, delegation of the issuing /

ceding company’s statutory authority must com-ply with state laws on licensing of managinggeneral agents, claims adjusters, etc.

iii It behooves the parties to draft the arbitrationclause broadly enough to encompass not onlythe interpretation of the reinsurance treaty, butalso all disputes concerning the formation ofthe fronting arrangement itself, as well as themeaning and effect of all collateralagreements. See ACE Capital Re Overseas Ltd. v.Central United Life Ins. Co., 307 F.3d 24 (2d Cir.2002) and cases cited therein on the scope ofclaims deemed arbitrable under appropriatelyworded broad arbitration clauses. GerlingGlobal Reinsurance Co v. ACE Property & CasualtyInsurance Co., 42 F. Appx. 522 (2d Cir. 2002) (In theabsence of all-encompassing language requiredto create a broad arbitration clause, disputeseeking rescission of facultative reinsurance cer-tificates for alleged fraudulent inducement tocontract not required to be arbitrated).

iv This clause is offered for illustrative purposesand is not intended to be comprehensive. In anactual treaty, security may be required to en-compass indemnity for the ceding company’sobligations to pay allocated loss adjustment ex-penses (“ALAE”) and / or maintain unearned pre-mium reserves as well.

v 11 NYCRR Part 126 (2014)vi Additional requirements address the receipt and

valuation of securities placed in the trust, thetrustee’s obligation to notify the parties uponoccurrence of certain events, and the termsunder which the trust may be terminated.

vii The potential difficulties in successfully battlingan insolvent reinsurer’s estate for proceedsunder a retrocession agreement are beyond thescope of this article. But see, generally, L. Schif-fer, “Cut-Through Provisions in ReinsuranceAgreements,” IRMI.com (March 2001) and L.Schiffer, “Playing the Name Game – An Updateon Cut-Through Clauses,” IRMI.com (August2009).

viii Indeed, perhaps the only reported cases of liti-gation over a cedent ’s drawdown of an LOC in-volve LOCs that were ordered by the arbitrationpanel after the arbitration incepted. GlobalReinsurance Corp. v. Sompo Japan Insurance, Inc.,2005 U.S. Dist. LEXIS 37969 (S.D.N.Y 2005);Meadows Indemnity Co., Ltd. v. Arkwright Mu-tual Insurance Co., 1996 U.S. Dist. LEXIS 14318(E.D. Pa. 1996). In such instances, the panel re-served to itself the authority to permit the ce-dent to draw under the LOC.


P A G E 8


20th Anniversary Committee AnnouncesGala DinnerIf you were at the 2014 SpringConference, you witnessed the openinground of this year’s commemoration ofthe founding of ARIAS•U.S. in 1994.Charles M. Foss, one of the founders,took attendees back to the earliest daysof the Society, showing reproductions ofthe minutes from the first Boardmeeting and the first Quarterly, anddescribing the sentiments and desiresof the founders that resulted in theoriginal objectives and organizationalstructure.

The commemoration will reach itsclimax on November 13 with a GalaDinner on the first night of the 2014 Fall Conference at the New York HiltonMidtown. There will be a shortreception followed by a full dinner. The 20th Anniversary Committeeencourages all ARIAS members to marktheir calendars now and plan to be apart of this celebration. They stronglyurge that ARIAS•U.S. members not hostor attend competing dinners on thenight of the Gala and instead to joinwith the Society in marking theoccasion.

In an effort to keep the cost of thedinner from being an added burden onattendees, ARIAS•U.S. is offeringcompanies, law firms, arbitrators, andthird party vendors who serve thearbitration community the opportunityto sponsor the event. There are threedifferent sponsorship levels: a Silversponsorship is offered at $1,000, Gold at$2,500, and Platinum at $5,000, withvarious benefits for each level. Theannouncement, posted on the websiteprovides details and the form forsponsors to commit.

The committee is asking prospective

committee will update the listfrequently as new programs arescheduled.

The International Calendar is locatedunder the Resources menu.

Stillman Is New Editor ofQuarterlyJames I. Rubin, Chairman of thePublications Committee, hasannounced that Thomas P. Stillman hasagreed to become the new Editor of theARIAS•U.S. Quarterly. Mr. Stillman, anARIAS•U.S. Certified Arbitrator since2008, has a broad range of experiencein major reinsurance and insurancedisputes, having spent 23 years withCNA. He was Senior Vice President andDeputy General Counsel of the firmbefore his recent retirement. Mr. Rubindescribed him as an excellent writerwho will be a very worthy successor toEugene Wollan, who recently passedaway. Mr. Rubin asked ARIAS membersto welcome the new editor by directingsubmissions to him for consideration asfeature articles in future issues of theQuarterly.

Mack is ARIAS UmpireAt its meeting on March 3, the ARIAS•U.S. Board of Directors officially confirmed an earlier vote toapprove Susan A. Mack as an ARIAS•U.S. Certified Umpire, bringingthe total number to 54.

Frankel and McComas areCertified ArbitratorsAlso at its meeting on March 3, theARIAS•U.S. Board approved GlennFrankel and Albert McComas asCertified Arbitrators, bringing the totalto 198. Mr. Frankel’s sponsors wereDavid Attisani, Lloyd Gura, and AndrewManeval. Mr. McComas’s sponsorswere John Cole, James Engel, and DavidBowers.

sponsors to reply as soon as possible, sothat advance planning can proceed.Anyone interested in joining as asponsor of the Anniversary GalaCelebration is asked to please completethe posted sponsorship form and returnit by email to Christina [email protected] before July 15.

First Webinar Notable Success; Second Coming on June 17If you missed the first webinar andwould like to catch up on what youmissed about “UnderwritingReinsurance Risks – Ceding Companyand Reinsurer Perspectives,” you can gothrough the appropriate yellow buttonon the ARIAS•U.S. website home page,sign up for an account (no cost) andhave access to the OnDemand versionof the webinar. There is no cost and youreceive no credit, but the sessionreceived rave reviews from those whoattended, so it may be worth an hourand a half of your time to gain theknowledge that was offered up by Bill O’Farrell and Mike Toman, withmoderation by Marc Abrams.

If you are looking to attend the secondwebinar, you will have to hurry.Registration will be open right up untilJune 17. It is entitled “Using andUnderstanding Actuaries.” For acomplete description of this event andof the Webinar Program, go to theWebinar Program calendar page. If youare already up to speed on the programand just would like to register for June 17, go to the yellow button on theARIAS•U.S. website home page.

International CommitteePosts Worldwide InsuranceEvents CalendarA new service for ARIAS members isnow up and running on the ARIASwebsite. The International Committeehas created a calendar of insurance andreinsurance events that are scheduledto take place around the world. Allrelevant events currently planned forthe next three years are included. The

new and notices


9 P A G E

Richard G. Waterman

The original ARIAS•U.S. Guidelines forArbitrator Conduct were promulgated in1998. The Guidelines, also known as thearbitrators’ code of conduct, contained tencanons with explanatory comments toprovide ethics guidance for conductingarbitrations based on prevailing industrypractice and principles of the organization.The Guidelines focused on best practicesand did not contain mandatory rules. In2010, Additional Ethics Guidelines werepromulgated as a supplement to theGuidelines to elucidate and expand on theethical considerations embodied in theoriginal Guidelines. In addition, severalmandatory rules were added. EffectiveJanuary 1, 2014, ARIAS•U.S. adopted a newCode of Conduct. The revised Code ofConduct is an integration of the originalGuidelines for Arbitrator Conduct and theAdditional Ethics Guidelines. The new Codeof Conduct contains significant updates,clarifying amendments and the creation ofadditional mandatory rules.i

There is no question that professional idealsand practices provide important internalbenefits for those who engage in them andexternal benefits for those served by them.The professional ideal defines ethicalprinciples of an organization. For instance,the Guidelines for Arbitrator Conductadopted in 1998 were intended to expressthe ideals, values, and ethical standard ofconduct to guide the obligations, behavior,and procedures of arbitration professionals.The revised Code of Conduct articulatessimilar guiding principles, however, also setsout compliant restrictions on behavior thatis far more rule focused than ideal orprinciple focused. By their nature, bestpractice principles are broad and morequalitative while mandatory rules are moredetailed, specific and quantitative. Insteadof a complex rules-based Code, a competingmodel, similar to other professional

organizations, would be to separate bestpractice principles from mandatory rules andwork on educational initiatives thatheighten an awareness of correct ethicalbehavior.

Few of us live up to professional idealsperfectly, and some fall short under certaincircumstances. Nonetheless, since thefounding of ARIAS•U.S. in 1994, there havebeen very few reported ethical violations.iiARIAS•U.S. certified arbitrators havedemonstrated a commitment to ethics andintegrity without a laundry list of mandatoryrules and without enforcement oversight.The issue, therefore, is how much behaviordoes ARIAS•U.S. believe it needs to regulatewith rules and how much to leave to theconscience and good judgment of individualmembers.

Arbitration and ProfessionalismMost people of good will always strive towork ethically by adhering to the standardsof their profession. It is a mark ofprofessionalism to act ethically. Althoughthe practice of arbitration may not beregarded as a traditional learned professionsuch as medicine, law or the ministry, theterm profession taken broadly includesteachers, engineers, scientists, accountants,business specialists and literally many otheroccupations. Similarly, the term ethics usedbroadly refers to ideals and aspirations aswell as rules of conduct. Since ideals, roleresponsibility, actions and comprehensivenorms are the source of specific rules, apriority should be placed on ideals ratherthan rules in determining professional ethicsstandards.

Codes of conduct function primarily as theprofessional ideology of the organization.They codify and communicate best practicestandards followed by members of theorganization and promote a sense ofbelonging to a group with common valuesand a common purpose. Codes are generally


opinion

Richard G.Waterman

Mr. Waterman is a charter memberand certified arbitrator/umpire ofARIAS•U.S. He co-authored the origi-nal Guidelines for Arbitrator Conductand served as chairman or co-chair-man of the ARIAS•U.S. Ethics Commit-tee for ten years.

Code of Conduct: A Focus on GuidingPrinciples or Rules of Behavior?

Effective January 1,2014, ARIAS•U.S.adopted a new

Code of Conduct. The revised Code of

Conduct is anintegration of theoriginal Guidelines

for ArbitratorConduct and theAdditional Ethics

Guidelines.


P A G E 1 0


aspirational in character and representthe principal objectives that everymember of the organization strives toattain. The effectiveness of codes toinfluence high practice standards variesgreatly. The main requirement is thatthe code of conduct be a clear andplausible formulation of the sharedvalues of the organization and itsmembers.

ARIAS•U.S. is a not-for-profit corporationorganized principally as an educationalorganization to promote the integrity ofthe arbitration process. Throughseminars and publications, ARIAS•U.S.seeks to train knowledgeable andexperienced industry professionals forservice as arbitration panel members.ARIAS•U.S. does not have the power tocontrol ethical behavior, but it cancontribute to the ethical responsivenessof arbitrators by calling their attentionto ethical dilemmas and helping themunderstand the architecture of theirobligations. The articulation of an ethicscode and its firm acceptance bypractitioners who serve on arbitrationpanels is an important first step towardensuring confidence and trust in thearbitration process.

The invitation to join ARIAS•U.S. andbecome a certified arbitrator mustinclude an understanding thatencourages individuals to learn the bestarbitration practices recognized by theorganization and to incorporate thosevirtues in their arbitration practices.ARIAS•U.S. offers ethics training toequip individuals to becomeprofessional arbitrators. The aim ofethics training is to motivate arbitratorsto observe the ethical obligationsprescribed by the Code in the conductof arbitration proceedings. Everyoneagrees that the reputation of thearbitration process is dependent in alarge measure upon the manner inwhich the arbitrators live up to theletter and the spirit that the Code ofConduct represents.

Due in part to the rarity of unethicalprofessional conduct, ARIAS•U.S. has notinitiated a process for filing,investigating and resolving complaintsof unethical conduct and probably doesnot want to legally regulateprofessional conduct beyond theprovisions of the Federal Arbitration Act

statutes already in place. Nonetheless, ifit is determined that allegations ofethics violations have tarnished thereputation of ARIAS•U.S. and itsmembers, ARIAS•U.S. needs not only toadd mandatory rules to its Code ofConduct, preferably in a separateappended section of the Code, but alsoestablish a disciplinary body with formalsanctions to enforce the mandatoryrules. Although the disciplinary body’spower and influence would be weakerthan other traditional professionalorganizations, the existence of adisciplinary body empowered tosuspend or revoke arbitratorcertification or reprimand any memberwho is found guilty of violating the ruleswould stimulate heightened awarenessto voluntarily follow established ethicalnorms.

Rules and More RulesMuch of the contemporary literatureregarding codes of conduct ispreoccupied with rule-governedbehavior. Understandably, we may needrules to clarify fundamental professionalstandards and the main parameters ofprofessional conduct expected ofeveryone. Nonetheless, there can neverbe enough rules to cover everything werecognize as an ethical situation. If allmembers of an organization observedthe highest professional practiceprinciples voluntarily, we could simplyforget about mandatory rules.

Furthermore, rules would not benecessary if the obligations ofarbitrators were always clear andobvious and could be met withoutdifficulty or sacrifice. Unfortunatelyarbitrators are frequently confrontedwith conflicts of duty and conflictsbetween duty and self-interest.However, an overemphasis on rules inprofessional codes can lead apractitioner to assume that prescribedactions are obligatory and all actionsthat are not prohibited are permitted. Tocounteract this tendency, codes ofconduct should incorporate ideals andthe traditions of the profession thatchallenge individuals to transcend therequirements of rules and more rules.

Much too much is being asked ofrecently adopted mandatory rules thathave been devised piecemeal in

response to often cited criticism of thearbitration process. It is not thatmandatory rules do not help to alleviatesome of the criticism; they clearly do.Rather, it is that no matter how manyrules and interpretations of rules havebeen or will be created, they will neversuffice to generate best arbitrationpractices on their own. ARIAS•U.S. mustemphasize its core guiding principleswith education strategies and not bymerely adding more new rules.Adequate education and enforcementpolicies are needed to complement theorganization’s efforts to promote theintegrity of the arbitration process.

There seem to be possibly three mainreasons ARIAS•U.S. has adopted somany rules. First, members seek claritythrough rules. Secondly, arbitrators wantto conduct the process fairly and do notwant to be held accountable for notcomplying with broadly worded guidingprinciples. Thirdly, some rules may havebeen adopted in response to a fewproblems isolated among a few badactors rather than widespread abuses orclear violations of core organizationalprinciples. In the twenty years sinceARIAS•U.S. was founded, there havebeen only a few reported, bona fidelapses in ethical judgment that possiblyviolated best practice principles.Moreover, every violation of a particularprinciple need not be addressedthrough prescriptive mandatory rules. IfARIAS•U.S. wants to promote highethical standards with fewer rules, thebest approach would be more emphasison ethics training.

Though the idea of adding moremandatory rules to the Code of Conductmay be appealing to some, ARIAS•U.S.might still want to consider a fewreasons why combining guidingprinciples with specific prescriptive rulesand prohibitions might not be the bestapproach. The original Guidelines wereintended to encourage aspirational bestpractice arbitration standards while therevised Code is mixture of best practiceideals and enumerated mandatory rulesas a means to control certain behavior.ARIAS•U.S. has not established a systemto monitor and sanction bad behaviorrule violations. Although Article II,Section 5 of the ARIAS•U.S. By-Lawscontains provisions to suspend or expel


1 1 P A G E


acutely aware of the importance ofethical behavior concerning all aspectsof the arbitration process. Therefore,initiatives that place a renewed focuson training to avoid ethical lapses needto be developed. Every member shouldbe regularly exposed to no-holds-barred debates on ethical quandariesof professional conduct and discussalternatives to resolve ethical dilem-mas encountered in actual practice.With enhanced ethics training, educa-tional support and guidance,ARIAS•U.S. members will continue touse their individual initiative, experi-ence and insight to follow acceptableethical norms far beyond what isrequired by mandatory rules.

2. Since it might not be enough torationally inspire everyone to actethically and voluntarily follow bestpractice principles and mandatoryrules in all circumstances, ARIAS•U.S.should consider forming a disciplinarybody with limited scope to initiallyreceive and investigate arbitrationpractice and rule violation complaints.Such a disciplinary body must begiven the power to safeguard againstthe potential of unwarrantedallegations being used inappropriatelyin the arbitration process. ARIAS•U.S.could isolate enforceable ruleprovisions of the revised Code in aseparate appended section to focuson an effective mechanism toregulate improper conduct andsanction violations. Attempts to form a disciplinary bodyto monitor the ethical behavior ofcertified arbitrators to enforcemandatory rules may not besuccessful. A disciplinary body wouldneed to rely on complaints by partiesin arbitration, their attorney orcriticism of colleagues. In addition,since a typical disciplinary body wouldnot have the authority nor theresources for an effective investigationand due process hearing, their limitedscope of enforcement effort would bepowerless to sanction misdeeds inmost circumstances. Clearly, adisciplinary body faces challenges ininvestigating and ensuring dueprocess, which is why mandatory rulesand enforcement are problematic.Alternatively, a disciplinary bodyformed to receive ethics complaints

a member for cause, such as violationof any by-laws or rules, this mechanismappears designed for enforcement ofgross misconduct situations. Theprovisions do not provide adequateprotocol needed for the fairenforcement of Code of Conduct ruleviolations.iii A different mechanismwould be more appropriate forenforcement of mandatory rules;however, the existence of mandatoryrules puts the organization in thebusiness of enforcement in addition toproviding educational programs andethical guidance for arbitrators.Training and guidance seem a moreappropriate role for ARIAS•U.S.

Generally, members of ARIAS•U.S.acknowledge the need for certain rulesand are prepared to voluntarily abideby them in the absence of deterringsanctions, provided other members aredoing likewise. Rules against conflictsof interest, confidentiality and ex partecommunications are examples. Toactively combat ethical missteps oractual misconduct, rules must beenforced with penalties to discourageacts that conflict with best practiceprinciples. Inadequate ethics trainingcan lead to ill-considered actions basedon erroneous information, especiallywhen self-interest seems to be at stake.At this time, ARIAS•U.S. has notestablished a disciplinary bodyempowered to examine rule violationsin order to reprimand, suspend orrevoke the membership or certificationof any professional who is found guiltyof violating the revised Code ofConduct.

Where Do We Go From HereARIAS•U.S. is a professionalorganization that has a fundamentalchallenge to promote best practiceprofessionalism among its members.ARIAS•U.S. determines the professionalqualifications for membership,determines the qualifications forarbitrator certification and offerseducational programs required tomaintain arbitrator certification.Anyone who has not met the criteriafor certification is not accepted, whilethose who do not maintain theireducational requirements are de-

certified. These control mechanismsinfluence the professionalism of itsmembers, but do not absolutely controltheir ethical behavior. ARIAS•U.S. mustprovide leadership to cultivate anenvironment in which members areinspired to accept their ethicalresponsibility voluntarily and follow thebest practice principles of theorganization without a bevy ofmandatory behavioral rules.

The original Guidelines for ArbitratorConduct and the new Code of Conductemphasize first principles. Arbitratorsare expected to uphold the integrity ofthe arbitration process, conduct eacharbitration in a fair manner and rendera just decision. It is a sharedfoundational understanding that broadindustry support of arbitration largelydepends on the quality of thearbitrators, their understanding ofcomplex issues, their experience, theirgood judgment and their personal andprofessional integrity. Although no onehas been sanctioned, reprimanded orde-certified for violating core principlesof the Guidelines, unfortunately theperceived unethical practices of a fewhave brought into question the fairness,integrity and trust in arbitration toresolve industry disputes. If actualunethical behavior of ARIAS•U.S.members is the root cause in a loss ofconfidence and trust in the arbitrationprocess, that confidence and trust mustbe restored by organizational leadershipand structural changes in policy thatstrengthen and raise the level ofprofessional practices including someform of enforcement oversight. Threeproposals to influence idealprofessional practices are worthy ofconsideration.

1. First and foremost is the crucial role ofethics training. Professional organiza-tions have limited control over mem-bers’ behavior despite the existence ofa code of conduct, mandatory rulesand punishments to encourage properbehavior. Consequently, ARIAS•U.S.should continue its efforts to perfectits Code of Conduct to increase theclarity of core values with an emphasison comprehensive best practice normsbased on sound industry custom andpractice dynamics rather than manda-tory rules. Every member should be


P A G E 1 2could consider issuing advisory opinionsbased on an accumulation of practicecomplaints. The explanatory value ofadvisory opinions may be limited becausethey interpret particular issues withincomplete information and do notrepresent an argued consensus amongthe membership. Nonetheless, carefulscrutiny of complaints would help identifya need for clearer rules which in turnwould probably reduce cases of improperbehavior. Another approach to monitorethical practices could be an arrangementwhereby individuals on an ethicscommittee are available to offer aninformal, confidential opinion to anymember seeking advice for a specificethical ambiguity or dilemma.

3. A traditional code of conduct incorporatesvalues, principles and professional stan-dards. The revised Code of Conduct recent-ly adopted by ARIAS•U.S. conflates thosebroad practice standards with specificmandatory behavior rules. The mismatchof process standards and specific outcomestandards seems to be inconsistent with afundamental organizational goal to pro-mote practices that challenge members totranscend the requirements of rigid rules.Ideally, best practice qualitative standardsthat guide arbitrators’ professional con-duct should be separated from mandatoryquantitative rules in a two-tier but closelyrelated arrangement. One section wouldarticulate basic responsibilities, broadobjectives and venerable best practiceprinciples while the other would enumer-ate enforceable mandatory rules. Whileideal practice principles and mandatoryrules are interrelated and distinctions arenot always clear-cut, a two-tier Code ofConduct would allow ARIAS•U.S. to con-centrate on enhanced ethics training andrational persuasion to encourage certifiedarbitrators to voluntarily follow ethicalbest practice standards. Moreover, the ability to enforce mandatoryrules would be more efficient if the revisedCode of Conduct separated best practicenorms from mandatory rules of specificbehavior. Reported cases of suspectedimproper behavior by arbitrators should becarefully examined to identify the practicestandards or rules that need clarificationor revision. Rogue arbitrators found guiltyof wrongdoing should be punished andpossibly removed from the organization.Separating best practice guidelines and

commentary from mandatory behavioralrules would also allow ARIAS•U.S. to active-ly combat misconduct by developing meas-ures of detection to monitor ethical misbe-havior that causes problems andimplement a fair procedure to sanctionrule violations.

On balance, ARIAS•U.S. will not be better offin the long run with the creation of morerules and convoluted rule interpretations.Rather, organizational ideals and bestarbitration practice principles need to beemphasized with enhanced educationalcontent. The inherent benefits of arbitrationto resolve industry disputes rests with thecommitment of ARIAS•U.S. certifiedarbitrators to uphold and advance theintegrity of the arbitration process and thespirit which the Code of Conduct represents.ARIAS•U.S. certified arbitrators have anexemplary record of upholding the principlesof integrity and fairness without specificmandatory rules. They have honored thearbitration profession by using their industryknowledge and experience to render fair andindependent decisions following coreorganizational guiding principles since theformation of ARIAS•U.S. twenty years ago.With a renewed focus on qualitative ethicalstandards that guide professional conduct,integrity and fairness will continue to beorganizational watchwords.▼

End NotesAbout the Author: Mr. Waterman is a charter memberand certified arbitrator/umpire of ARIAS•U.S. He co-au-thored the original Guidelines for Arbitrator Conductand served as chairman or co-chairman of theARIAS•U.S. Ethics Committee for ten years. Additionally,Mr. Waterman has studied ethical concepts and exam-ined model codes of conduct in a number of fields, in-cluding ethical problems faced by theinsurance/reinsurance industry. He has also written sev-eral published essays pertaining to ethics in small groupdecision making similar to arbitration panel delibera-tions. Mr. Waterman is an industry consultant and for-mer reinsurance executive. He has served on numerousindustry arbitration panels and has mediated manyother reinsurance disputes.

i ARIAS•U.S. Rules for the Resolution of U.S. Insurance andReinsurance Disputes, also revised effective January 1,2014, is not a subject of this commentary.

ii The category “ethical violations” encompasses a rangeof behaviors including arbitrator bias or partiality;however, bias, partiality and debiasing techniques arenot directly addressed in this commentary. See gener-ally, Richard G. Waterman, Debiasing the Biased,ARIAS•U.S. Quarterly, Number 4 (2011).

iii See By-Laws of ARIAS•U.S., Article II, Section 5 – Sus-pension/Expulsion


ARIAS•U.S. certifiedarbitrators have anexemplary record ofupholding theprinciples ofintegrity andfairness withoutspecific mandatoryrules. They havehonored thearbitrationprofession by usingtheir industryknowledge andexperience to renderfair and independentdecisions followingcore organizationalguiding principlessince the formationof ARIAS•U.S. twentyyears ago.


1 3 P A G EIn each issue of the Quarterly, this columnlists employment changes, re-locations, andaddress changes, both postal and email thathave come in during the last quarter, so thatmembers can adjust their addressdirectories.

Although we will continue to highlightchanges and moves here, remember thatthe ARIAS•U.S. Membership Directory on thewebsite is updated frequently; you canalways find there the most currentinformation that we have on file. If you seeany errors in that directory, please notify usat [email protected].

Do not forget to notify us when youraddress changes. Also, if we missed yourchange below, please let us know, so that itcan be included in the next Quarterly.

Recent Moves and AnnouncementsWilliam M. Popalisky is now at Crowell &Moring LLP. He can be reached at 590Madison Avenue, New York, NY 10022, phone212-895-4334, fax 212-223-4134, [email protected].

Peter J. Hildebrand has moved to newoffices. He can be found at Peter HildebrandLLC, 690 Americas Cup Cove, Alpharetta, GA30005. All other contact informationremains the same.

Everyone at Patton Boggs has a new emailaddress and company name. The newcompany name is Squire Patton Boggs (US)LLP. Otherwise, phone numbers andaddresses remain the same. New emailsare as follows:

John M. Nonna [email protected], Suman Chakraborty [email protected], Eridania [email protected], Larry P. Schiffer [email protected].

Vincent J. Vitkowsky and Charles W. Fortunehave joined Seiger Gfeller Laurie LLP asPartners. Their new contact information isas follows:

Charles W. Fortune, Seiger GfellerLaurie LLP, 65 Memorial Road / Suite340, West Hartford, CT 06107, phone860-760-8423, fax 860-760-8401,email [email protected].

Vincent J. Vitkowsky, Seiger GfellerLaurie LLP, 330 Madison Avenue, 6thFloor, New York, NY 10017, phone 212-653-8870, fax 646-495-5006, [email protected].

James W. Schacht and The Schacht Grouphave a new address and phone numbers,namely, The Schacht Group, c/o FTIConsulting, 227 West Monroe St., Suite 900,Chicago, Illinois 60606, phone 312-428-2624,cell 312-259-4161, fax 312-759-8119. Emailremains the same.

Former ARIAS Chairman Mary Lopattolaunched her own firm on February 3 withtrial attorney John Williams. She willcontinue her practice in reinsurancearbitration and litigation. Ms. Lopatto can bereached at Williams Lopatto PLLC, 1776 KStreet, N.W., Suite 800, Washington, D.C.20006, phone 202-296-1661, [email protected], websitewww.WilliamsLopatto.com.

Key Coleman has moved to Philadelphia. Heis now with Smart Devine, 1600 MarketStreet, 32nd Floor, Philadelphia, PA 19103,phone 267-670-7373, fax 215-238-8469, email [email protected].


memberson themove

DID YOU KNOW…?THAT ALL ARTICLES PUBLISHED IN PAST ARIAS•U.S. QUARTERLIES CAN BE LOCATED BY AUTHOR,TITLE, ISSUE (IN WHICH IT APPEARED), AND KEYWORD? THE QUARTERLY ARCHIVE IS ON THEWEBSITE UNDER THE RESOURCES MENU. ALL LISTINGS LINK TO THE RESPECTIVE ISSUES.

2nd Qtr. 14_2nd Qtr 14 6/16/14 11:30 AM Page 13

P A G E 1 4


Spring CoProduced Better D

This year’s conference, on May7-9 at The Ritz-Carlton KeyBiscayne, was directed by

Co-Chairs Mark Megaw of ACE andHarry Cohen of Crowell & Moring; it was entitled “Making BetterDecisions.”

Of course, ARIAS•U.S. membersalready think they know how tomake decisions. After all, they havebeen doing it all their lives. So therewere many doubters who arrived onWednesday for the opening session.They quickly found themselvesdoubting their skills as Dr. JoanSchmit, a professor at the Universityof Wisconsin, schooled them on thehidden influences that guidepeople’s thinking and cause biasedand irrational decisions throughoutthe business and judicial systems,including dispute resolution. Sheprovided some guidance on how toavoid these influences, as well.

After learning that the decision-making processes that attendeeshad confidently relied upon foryears were flawed, the next sessiontold them how to make thembetter using decision trees. Dr. Bruce Beron, of the LitigationRisk Management Institute, trackedthrough the process of breakingdown decisions into componentsabout which probabilities can beestimated. He then showed how touse them in determining allocationof settlements.

The conference began with lunch on the patio.

Next, bringing that process into the realworld of arbitration, David Attisani andMichael Olsan presented two sides of ahypothetical dispute to arbitratorBarbara Niehus, arguing how theallocation of the settled loss – as shapedby the decision tree – informed theoutcome of a reinsurance presentation.The debate covered post-settlementallocation law and showed howdifferent decision-making orientationscan lead to different conclusions.

Wrapping up the first day, the StrategicPlanning Committee Co-Chairs

Elizabeth Mullins and Mary Kay Vyskocilsummarized the latest work on anumber of initiatives being pursued bythe committee, and two of the Co-Chairs of the Arbitration Task Force,Scott Birrell and Jeffrey Rubin, did thesame for two of their developingprograms, the Neutral Arbitration Rulesand Streamlined Arbitration Rules.

Advance billing of the conference hadfeatured ARIAS’s first ever “SpeedDating.” There was doubt and fearabout how speed dating would workout, but when it came together on


ConferenceDecision Makers

Thursday morning, there was a roar ofenthusiastic conversation in threerooms for the hour and fifteen minutebreakouts. Arbitrators sat across fromcompany and law firm representatives,gave concise summaries of theirqualifications, and heard aboutcompany values and characteristics.The sound of air horns could be heardevery five minutes throughout theballroom area at The Ritz-Carlton asarbitrators were signaled to move totheir next stations. The consensus wasthat it was a valuable trainingexperience for all.

The launch of the 20th AnniversaryCommemoration took place at mid-morning on Thursday as Charlie Foss,one of the founders and a long-timeBoard member, showed some of theoriginal documents that brought aboutthe Society, including the minutes ofthe first Board meeting on May 6, 1994and the first Quarterly, dated December1994. He described the sentiments anddesires of the founders that broughtabout the original objectives andorganizational structure. Thecommemoration will conclude with agala dinner at the Fall Conference onNovember 13.

A focus on making better ethicaldecisions was provided by small-groupdiscussions of a challenging ethicshypothetical, written and directed by Edward P. Krugman. The six breakoutshad two discussion leaders each. Asummary of the conclusions reached by

Co-Chairs Harry Cohen and Mark Megaw introduced the conference theme.

President Eric Kobrick welcomed conference attendees.


P A G E 1 6


the groups was presented on Friday morning by Mr. Krugman and other members of the EthicsDiscussion Committee, Mark Gurevitz, Eric Kobrick, andJames Rubin.

The first sessions on Friday morning, “Making BetterChoices – Choose your Door” consisted of three tracks,chosen by attendees at registration. Dr. Philip Anthony,CEO of DecisionQuest, using videos and study results,showed how jury research reveals the dynamics behindgroup decision making and what case methodologiesfail to reach them.

A second track explored social media’s impact onarbitration decision making, including its role inarbitrator selection decisions and within the disputeresolution process.

The third track gave attendees the opportunity to hearfrom some of our most experienced arbitrators how tomake the best decisions at key moments in thearbitration process.

A significant contribution to the subject of decisionmaking was provided on Friday morning by the keynote

Are We Rational? – Dr. Joan Schmit makes a point… …and emphasizes her conclusion.

What Does a Decision Tree Tell Us? - Dr. BruceBeron explained how it works.

speaker, Judge Michael B. Mukasey, former U.S. Attorney General and former Chief Judge of the U.S. District Court of New York. The Judge was interviewed by Mark Megaw for what became afascinating hour.

Of course, there was time for recreation on Thursday afternoon, witha golf tournament at nearby Crandon Golf, chaired by JenniferDevery , a tennis tournament at the hotel’s Cliff Drysdale-designedtennis courts, chaired by Eric Kobrick, and a tour to the Everglades.

Two receptions on the Grand Lawn gave attendees opportunities tospend some time renewing old acquaintances and making newones.

In all, the 2014 ARIAS•U.S. Spring Conference was a refreshinglydifferent type of training event that left everyone feeling a littlemore confident in making decisions on many aspects of reinsurancearbitration. And the Ritz-Carlton ended up leaving everyoneimpressed by the beautiful, friendly environment…a perfect venuefor ARIAS•U.S. training.

The audience focused intently on how to use decision trees.


1 7 P A G E


Carving Up the Giving Tree – David Attisani and Michael Olsan battled two sides of adispute, each using decision trees to make their points.

Arbitrator Barbara Niehus judged the battle. Dr. Beron critiqued the battle.

The StrategicPlanning Committeeand Arbitration Task

Force providedprogress reports.

From left, ElizabethMullins, Mary Kay

Vyskocil, JeffreyRubin, Scott Birrell.


P A G E 1 8


Marty Haber (l) and David Thirkill expressed opinions about the reports.

Speed datersmoved to newpositions whenthe hornssounded everyfive minutes.

C0-Founder Charles Foss described “What Prompted ARIAS•U.S.”

Edward Krugman laid out the issues in the factpattern for ethics breakouts.

The next day, Ethics Discussion Committee memberspresented the breakout results.

From left, Mark Gurevitz, Eric Kobrick, EdwardKrugman, and James Rubin.


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Making Better Choices - Choose Your Door

Door One – Jury Research Insight into Group Decisions.Dr. Philip Anthony cited extensive jury research studies.

Door Two – How Does Social Media Change Hiringand Arbitral Decisions? From left, Martin Haber,Vivian Hood, Seema Misra, Larry Schiffer.

Door Three – What Tools DoSeasoned Arbitrators Use to ReachDecisions? From left, Richard White,Robert Hall, Caleb Fowler, andmoderator Deirdre Johnson.

For the Keynote, Judge MichaelMukasey was interviewed

by Mark Megaw.

Chairman Jeffrey Rubin wrapped up the 2014 Spring Conference


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Around the Conference


2 1 P A G E



P A G E 2 2


Law Committee Case SummariesSince March of 2006, in a section of the ARIAS•U.S. websiteentitled “Law Committee Reports,” the Law Committee hasbeen publishing summaries of recent U.S. cases addressingarbitration and reinsurance-related issues. Individual membersare also invited to submit summaries of cases, legislation,statutes or regulations for potential publication by thecommittee.

These reports are on the website under the Resources menu.

As of the middle of May 2014, there were 96 published casesummaries and five regulation summaries on the website. Acomprehensive listing of relevant state statutes is also provided.The committee encourages members to review the existingsummaries and to routinely peruse this section for newadditions

Provided below is one recent case summary taken from theLaw Committee Reports.

Eagle Star Insurance Company Ltd. v. Arrowood Indemn. Co., Ltd.2013 U.S. Dist. LEXIS 135869 (S.D.N.Y. Sept. 23, 2013)

Court: United States District Court for the Southern District of New York

Dates Decided: September 23, 2013

Issues Decided: Whether confidential arbitration information can remain sealed when submitted to a federal court, as part of apetition to confirm an arbitral award.

Submitted by Robert A. Kole*

Factual Background Eagle Star Insurance Company and Home and Overseas Insurance Company (Eagle) sought to confirm an award resulting froman arbitration with Arrowood Indemnity Company (Arrowood). Eagle’s petition to confirm, and Arrowood’s subsequent motion todismiss, contained information deemed by the parties to be confidential arbitration information (Arbitration Information), inaccordance with the confidentiality agreement governing their dispute (the Confidentiality Agreement). As a result, the partiessought to file their briefs and supporting evidence under seal, which the Court initially allowed, via three different sealing orders.

Before the Court issued a substantive decision, the parties reached a settlement and filed a joint stipulation of dismissal, therebyobviating the need for the Court to address the merits of their dispute. Subsequently, five insurance companies (the Movants)that were involved in separate, on-going arbitrations with Arrowood sought to intervene, and to unseal any records that hadbeen filed in the case, asserting both a common law and First Amendment right to access judicial documents.

The Holding The Court concluded that the confidential arbitration information should be unsealed. After addressing certain proceduralarguments, the Court conducted a three-step analysis.

First, the Court analyzed whether the documents sought by Movants qualified as “judicial documents,” for which a presumptionof access applied. Id. at *5. The Court concluded that they did, because they were “relevant to performance of the judicial functionand useful in the judicial process” – a relatively low burden. Id. (citations omitted).

Second, the Court considered the weight that should be given to the presumption of access, by looking to “the role of thematerial at issue in the exercise of Article III judicial power and the resultant value of such information to those monitoring thefederal courts.” Id. at *7 (citations omitted). Because the Confidential Information sought by Movants was at “the heart of whatthe Court [was] asked to act upon,” the Court concluded that the “weight of the presumption of access ... is correspondinglyhigh.” Id.

Third, the Court sought to balance the high presumption of access against any competing considerations supporting continuedconfidentiality. The primary considerations identified by Arrowood were its expectation of confidentiality (due to theConfidentiality Agreement and the Court’s prior sealing orders), and the possibility that disclosure would “compromise itsposition with respect to the separate arbitrations in which it is engaged with Movants.” Id. at *9. The Court concluded that thoseconsiderations failed to trump the presumption of public access, and unsealed the documents filed by the parties. Id.

* Robert A. Kole is the co-chair of the Insurance/Reinsurance Practice Group of Choate, Hall & Stewart LLP, as well as the Co-chair ofthe ARIAS Law Committee.


2 3 P A G E

Glenn A. Frankel Since 2006, Glenn Frankel has served as VicePresident of the Reinsurance Group for TheHartford, where he currently leads theAssumed Claim, Reinsurance Collections,Commutations and Reinsurance Operationsunits. His responsibilities include oversightof: (1) Hartford’s assumed reinsuranceexposure, consisting of complex domesticand international claims. The book includesasbestos, environmental, toxic tort, workers’compensation, general liability, auto andproperty exposures; (2) all noticing,reporting and collection functions for allproperty and casualty ceded reinsurance(runoff and ongoing); (3) commutationanalysis, negotiation and execution of allproperty and casualty ceded and assumedreinsurance contracts (runoff and ongoing),and all scheme and liquidation proceedings;and (4) unit that provides operational andadministrative support to all reinsurancefunctions.

Mr. Frankel is also responsible for all of TheHartford’s reinsurance litigations andarbitrations. From 2003-2006, Mr. Frankelwas an Associate General Counsel andAssistant Vice President with The Hartford’sComplex Claim Legal Group, where he wasjoint-head of an in-house legal groupresponsible for asbestos, environmental andtoxic tort direct claims. Mr. Frankelsupervised attorneys who provided day-to-day legal advice to claim handlers,supervised outside counsel, drafted legaldocuments and memorandums, negotiatedcomplex matters, and managed coveragelitigation.

Prior to joining The Hartford, Mr. Frankelserved as Managing Counsel with TravelersProperty & Casualty Company (workingprimarily on asbestos, environmental andtoxic tort direct claims), and was a litigationassociate with the law firm of Day, Berry &Howard (now Day Pitney) in Hartford, CT.

Mr. Frankel earned his J.D. from St. John’sUniversity School of Law (Cum Laude), andhis B.A. in economics from WesleyanUniversity.

Albert L. McComasSince his retirement from Zurich NorthAmerica in 2007, Albert McComas has servedas a court-appointed mediator andinsurance consultant. As a mediator, he haspresided over 43 cases. As an insuranceconsultant, he has provided experttestimony on issues related to claimhandling and bad faith in state and federalcases.

During his 21 years at Zurich North Americaand its affiliates, Mr. McComas served invarious capacities including business unitGeneral Counsel and group Chief ClaimsAttorney. In the latter capacity, he oversawthe department responsible for themanagement of virtually all of thecompany’s coverage and bad faith litigation.He also oversaw the claim auditdepartment. Over the course of his career atZurich, Mr. McComas managed hundreds ofcoverage and bad faith cases, including someof the most significant exposuresconfronting the company. He also personallynegotiated many of the company’s largestsettlements with insureds.

Prior to his career at Zurich North America,Mr. McComas served for several years as alitigation attorney at a Baltimore law firm.Most of his work there was focused on thedefense of tort claims for insurancecompanies.

In addition to his law degree from theUniversity of Maryland School of Law, Mr.McComas has a Bachelor’s degree inBusiness Administration and a Master’s inBusiness Administration from LoyolaUniversity Maryland.

Profiles of all certified arbitratorsare on the website at www.arias-us.org

in focusGlenn A.Frankel

Recently Certified Arbitrators


Albert L. McComas


Back to the

Breakers!

ARIAS•US intersperses Spring Conference visits to other ven-

ues to avoid having The Breakers become too routine, but the

record of good experiences there compels us to return. Block

out the dates of May 6-8, 2015 to avoid planning anything else.

Many members have said we should always have ARIAS•U.S.

Spring Conferences at The Breakers, but a change of scenery

helps us to keep our Breakers experiences fresh. Plan to be there

for our 2015 return!


Save the Date…

www.thebreakers.com

THE BREAKERSPALM BEACH, FLORIDA

May 6-8, 2015


Do you know someone who is interested inlearning more about ARIAS•U.S.? If so, pass on this letter of invitation and membership application.

An Invitation…The rapid growth of ARIAS•U.S. (AIDAReinsurance & Insurance Arbitration Society) sinceits incorporation in May of 1994 testifies to theincreasing importance of the Society in the field ofreinsurance arbitration. Training and certification ofarbitrators through educational seminars,conferences, and publications has assistedARIAS•U.S. in achieving its goals of increasing thepool of qualified arbitrators and improving thearbitration process. As of June 2014, ARIAS•U.S.was comprised of 315 individual members and 112corporate memberships, totaling 865 individualmembers and designated corporate representatives,of which 199 are certified as arbitrators, 54 arecertified as umpires, and 35 are qualified asmediators.

The Society offers its Umpire AppointmentProcedure, based on a unique software programcreated specifically for ARIAS, that randomlygenerates the names of umpire candidates from thelist of ARIAS•U.S. Certified Umpires. Theprocedure is free to members and non-members. It is described in detail in the Selecting an Umpiresection of the website.

Similarly, a random, neutral selection of all threepanel members from a list of ARIAS CertifiedArbitrators is offered at no cost. Details of theprocedure are available on the website underNeutral Selection Procedure.

The website offers the "Arbitrator, Umpire, andMediator Search" feature that searches the extensivebackground data of our Certified Arbitrators. Thesearch results list is linked to their profiles,containing details about their work experience andcurrent contact information.

Over the years, ARIAS•U.S. has held conferencesand workshops in Chicago, Marco Island, SanFrancisco, San Diego, Philadelphia, Baltimore,Washington, Boston, Miami, New York, PuertoRico, Palm Beach, Boca Raton, Las Vegas, Marinadel Rey, Amelia Island, Key Biscayne, andBermuda. The Society has brought together manyof the leading professionals in the field to supportits educational and training objectives.

For many years, the Society published theARIAS•U.S. Membership Directory, which wasprovided to members. In 2009, it was broughtonline, where it is available for members only.ARIAS also publishes the ARIAS•U.S. PracticalGuide to Reinsurance Arbitration Procedure, TheARIAS•U.S. Rules for the Resolution of U.S.Insurance and Reinsurance Disputes, and theARIAS•U.S. Code of Conduct. These onlinepublications … as well as the ARIAS•U.S. Quarterlyjournal, special member rates for conferences, andaccess to educational seminars and intensivearbitrator training workshops, are among thebenefits of membership in ARIAS.

If you are not already a member, we invite you toenjoy all ARIAS•U.S. benefits by joining. Complete information is in the Membership area ofthe website; an application form and an onlineapplication system are also available there. If youhave any questions regarding membership, pleasecontact Bill Yankus, Executive Director, [email protected] or 914-966-3180, ext. 116.

Join us and become an active part of ARIAS•U.S.,the leading trade association for the insurance andreinsurance arbitration industry.

Sincerely,

Jeffrey M. Rubin Eric S. Kobrick

Chairman President


MembershipApplication

AIDA Reinsurance & Insurance Arbitration SocietyPO BOX 9001MOUNT VERNON, NY 10552

Online membership application is available

with a credit card through “Membership”

at www.arias-us.org.

Complete information about

ARIAS•U.S. is available at

www.arias-us.org.

Included are current

biographies of all

certified arbitrators,

a current calendar of

upcoming events,

online membership

application, and

online registration

for meetings.

914-966-3180, ext. 116

Fax: 914-966-3264

Email: [email protected]

NAME & POSITION

COMPANY or FIRM

STREET ADDRESS

CITY/STATE/ZIP

PHONE CELL

FAX E-MAIL

Fees and Annual Dues: Effective 10/1/13

INDIVIDUAL CORPORATION & LAW FIRM

INITIATION FEE $500 $1,500

ANNUAL DUES (CALENDAR YEAR)• $425 $1,300

FIRST-YEAR DUES AS OF APRIL 1 $283 $867 (JOINING APRIL 1 - JUNE 30)

FIRST-YEAR DUES AS OF JULY 1 $142 $433 (JOINING JULY 1 - SEPT. 30)

TOTAL (ADD APPROPRIATE DUES TO INITIATION FEE) $ $

* Member joining and paying the full annual dues after October 1 is considered paid through the following calendar year.

** As a benefit of membership, you will receive the ARIAS•U.S. Quarterly, published four times a year. Approximately $40 of your dues payment will be allocated to this benefit.

Payment by check: Enclosed is my check in the amount of $____________Please make checks payable to ARIAS•U.S. (Fed. I.D. No. 13-3804860) and mail with registration form to: By First Class mail: ARIAS•U.S., 6599 Solutions Center, Chicago, IL 60677-6005 By Overnight mail: ARIAS•U.S., Lockbox #776599, 350 E. Devon Ave., Ithaca, IL 60143

Payment by credit card: Fax to 914-966-3264 or mail to ARIAS•U.S., P.O. Box 9001, Mt. Vernon, NY 10552.Please charge my credit card: (NOTE: Credit card charges will have 3% added to cover the processing fee.)

■■ AmEx ■■ Visa ■■ MasterCard in the amount of $_________________

Account no. ______________________________________

Exp. _______/_______/_______ Security Code ____________________________

Cardholder’s name (please print) ____________________________________________

Cardholder’s address __________________________________________________

Signature ____________________________________________________________

NOTE: Corporate memberships include up to five designated representatives. Additional representatives may be designated for an additional $425 per individual, per year.Names of designated corporate representatives must be submitted on corporation/organiza-tion letterhead or by email from the corporate key contact and include the following information for each: name, address, phone, cell, fax and e-mail.

By signing below, I agree that I have read the ARIAS•U.S. Code of Conduct and the By-Laws ofARIAS•U.S. and agree to abide and be bound by the ARIAS•U.S. Code of Conduct and the By-Laws of ARIAS•U.S. The By-Laws are available at www.arias-us.org under the About ARIASmenu. The Code of Conduct is available under the Resources menu.

________________________________________________Signature of Individual or Corporate Member Applicant


P.O. Box 9001Mt. Vernon, NY 10552

Board of DirectorsChairman

Jeffrey M. RubinOdyssey Reinsurance Company300 First Stamford PlaceStamford, CT [email protected]

President Eric S. Kobrick

American International Group, Inc.80 Pine Street, 35th FloorNew York, NY [email protected]

Vice President (President Elect)Elizabeth A. Mullins

Swiss Re America Holding Corporation175 King StreetArmonk, NY [email protected]

Vice PresidentDeirdre G. Johnson

Crowell & Moring LLP1001 Pennsylvania Avenue NWWashington, D.C. [email protected]

Ann L. FieldZurich Insurance Group1400 American LaneSchaumburg, IL [email protected]

Michael A. FrantzMunich Re America 555 College Road EastPrinceton, NJ [email protected]

James I. RubinButler Rubin Saltarelli & Boyd LLPThree First National Plaza70 West Madison StreetChicago, IL [email protected]

Mark T. Megaw ACE Group Holdings436 Walnut StreetPhiladelphia, PA [email protected]

John M. Nonna Squire Patton Boggs (US) LLP1185 Avenue of the AmericasNew York, NY 10036Phone: [email protected]

Chairman EmeritusT. Richard Kennedy

Directors EmeritiCharles M. FossMark S. GurevitzCharles W. Havens IIIRonald A. Jacks*Susan E. MackRobert M. ManginoEdmond F. Rondepierre*Daniel E. Schmidt, IV

*deceased

AdministrationTreasurer

Peter A. Gentile7976 Cranes Pointe WayWest Palm Beach, FL. [email protected]

Executive Director/ CorporateSecretary

William H. YankusSenior Vice PresidentCINN Worldwide, Inc.P.O. Box 9001Mt. Vernon, NY 10552914-966-3180 ext. [email protected]


Documents

ARIAS Quarterly 2nd Qtr 2014