Traditionally, all aspects of reinsurance arbitrations were considered confidential, including the arbitration award. Most reinsurance arbitrations today still include agreement on a confidentiality order. Nevertheless, when one of the parties to a reinsurance arbitration goes to court to either confirm, modify or vacate the final award, a tension arises between accessing the public court system and maintaining confidentiality. Over the last several years, multiple courts have addressed that tension by unsealing arbitration awards.
In a recent case, the Third Circuit Court of Appeals, followed this trend and unsealed what was a confidential arbitration award. This time at the request of a reinsurer that was not a party to the award.
In Pennsylvania National Casualty Insurance Group v. New England Reinsurance Corp., Nos. 20-1635 and 20-1872 (3rd Cir. Dec. 24, 2020) (Not Precedential), the circuit court affirmed a district court order unsealing a reinsurance arbitration award. The cedent brought an arbitration against two of its reinsurers for non-payment of certain claims. The cedent received a favorable award and proceeded to district court to confirm the award and reduce it to a judgment. The cedent asked that the district court seal the award, which it did in the first instance.
Subsequently, the cedent withdrew its petition to confirm the award after the parties settled, but another reinsurer intervened and sought access to the award. Initially, the district court denied the intervenor’s application to unseal the award, but the Third Circuit reversed and remanded the case back to the district court to consider whether the award should be unsealed under a common-law-right-of-access analysis. Pennsylvania Nat’l Mut. Cas. Ins. Co. v. New England Reinsurance Corp., 794 F. App’x 213, 215–16 (3d Cir. Dec. 6, 2019). On remand, the district court unsealed the award based on the common-law-right-of-access analysis and this appeal ensued.
In affirming, the circuit court rejected a narrow reading of the right-to-access based on “use” of the award and held that:
[the cedent] filed the arbitration award on the docket with the District Court as
part of its motion to confirm the award. Thus, according to our precedents, the award
became a judicial record subject to the common-law right of access.
In the Third Circuit, this means that if the award (or any document) finds its way into the clerk’s office, it becomes a judicial record and is subject to public access.
That did not end the inquiry, however, because if the cedent demonstrated a specific harm or clearly defined injury sufficient to overcome the presumption of public access then the award would remain sealed. Unfortunately, neither the district court nor the circuit court was convinced of a specific harm or clearly defined injury. The cedent argued that other reinsurers might resist payment if they had access to the arbitration award. The court said that the district court did not abuse its discretion when it held that it could not
“determine how many possible relationships could be impacted, the amount of money that could be at stake, the types of actions other parties may pursue, or the likelihood that any such actions would be
successful.”
This trend in unsealing arbitration awards filed with district courts is contrary to the tradition of confidentiality. We have seen cases where, even after payment, petitions to confirm are filed so that the award becomes public for future use by the winning party. This case is similar because it is the non-party reinsurer that will try to use this award in its dispute with the cedent. Will the subsequent arbitration panel be impressed by this disclosure? Or will the unsealing victory be Pyrrhic?
