Originally from:

Journal of American Arbitration (JAA) - Vol. 6, No. 1

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ARTICLES

Finality of Arbitral Awards Enforced in
National Cas. Co. v. First State Ins. Group
By Shant Zakarian

I. OVERVIEW
National Casualty Co. v. First State Insurance Group
addressed the discretion of an arbitration panel to draw an adverse inference rather than compel discovery production. The
conformity of the federal court’s decisions with national arbitration
policy was examined. The Court recognized the virtually
unlimited arbitral discretion in substantive and procedural
decisions during a hearing.
A dispute arose between National Casualty Company
(National Casualty) and First State Insurance Group (First State),
concerning the reimbursement owed to First State in connection
with a reinsurance contract for non-product liability claims.1 The
parties had previously agreed to a broad arbitration agreement that
relieved the arbitration panel of the obligation to follow the “strict
letters of the law” and “all judicial formalities.” 2 National
Casualty agreed to begin arbitration proceedings even after
suspecting First State misrepresented facts pertaining to the
reinsurance contract.3 During the arbitration discovery proceedings
National Casualty requested that First State produce specific
documents.4 National Casualty believed the documents would
reveal First State’s internal legal evaluations concerning the claims
for which it had requested reinsurance compensation.5 The
arbitration panel ordered First State to produce the documents,
cautioning that the panel would draw the appropriate adverse
inferences if the company did not fulfill its production obligation.6
First State declined to produce the documents, claiming they were
privileged attorney-client communications.7 First State feared that
production of the documents might waive any privilege in future
dealings with its insured clients.8 National Casualty protested First
State’s refusal to produce the requested documents and sought a
delay in the arbitration hearing in order to submit a brief on the
prejudicial effect of withholding the requested documents.9 The
arbitration panel denied National Casualty’s request.10
Subsequently, National Casualty filed a claim in District Court for
the District of Massachusetts requesting enjoinder of further
arbitration hearings.11 While National Casualty’s enjoinder claim