Judge Voids $5M Award Against Reinsurers, Citing Bias

By Chuck Stanley

Law360, New York (April 3, 2017, 7:38 PM EDT) -- A New York federal judge on Friday vacated a $5 million arbitral award against British reinsurers after learning one of the arbitrators had an undisclosed business relationship with the Florida workers' compensation firm that filed the arbitration claim.

Alex Campos failed to disclose his extensive business relationships with high-level employees of Insurance Company of the Americas when the firm appointed him to an arbitration panel in a dispute over a reinsurance contract with Lloyd’s of London underwriters, calling into question his impartiality and placing a cloud over the panel’s decision in favor of ICA, judge Vernon S. Broderick said in a decision vacating the award.

“Campos had close business relationships with numerous principals of ICA, a party to the arbitration, and the number and variety of these relationships suggest he was personally acquainted with some of these individuals over a number of years,” the decision states. “Arbitrator Campos’ failure to disclose his significant relationships with principals of ICA, and with ICA itself, requires vacatur of the arbitration award.”

The underlying dispute centers on whether agreements for reinsurance against multiple workers’ comp claims were limited to cases in which more than one person was injured as the result of a single accident.

The tribunal found that the first- and second-layer underwriters were responsible for more than $2.5 million under claims related to two separate incidents resulting in payouts from ICA and third-layer underwriters were responsible for up to $2.5 million more if one claim in which an injured driver requires lifelong care exceeds $5 million, as is anticipated by the insurance company.

The parties filed cross-claims in federal court, with ICA seeking to confirm the award and the reinsurers claiming that the award was tainted by unfair practices and Campos' failure to disclose his ties to ICA. A second group of underwriters joined the suit, claiming they were never informed of the arbitral proceedings.

Campos, according to court documents, dramatically underplayed his relationship with ICA, stating he had met ICA chairman Gary Hirst 10 years before the proceedings in relation to a failed business deal but claimed not to have had an ongoing relationship with him.

But the underwriters found that Campos operated a business that shared the same office space with ICA and had previously employed several of the company’s high-level employees. ICA Director Ricardo Rios, for example, had previously served as the chief financial officer for Vensure, Campos’ company.

The fact that neither Rios nor Campos acknowledged that they knew each other during the three-day arbitration, Judge Broderick said, was “troubling.”

Representatives for the parties could not immediately be reached for comment.

The underwriters are represented by Kenneth M. Portner and Timothy W. Stalker at Weber Gallagher Simpson Stapleton Fires & Newby LLP and Joshua P. Broudy of Rosenthal Lurie & Broudy LLC. 

Insurance Company of the Americas is represented by Phillip J. Loree Jr. of Loree & Loree.

The cases are Certain Underwriting Members of Lloyd's of London Subscribing to Treaty No. 0272/04 v. Insurance Company of the Americas, case number 1:16-cv-00374, and Certain Underwriting Members of Lloyd's of London v. Insurance Company of the Americas, case number 1:16-cv-00323, both in the U.S. District Court for the Southern District of New York.