A New York federal district court denied Transatlantic Reinsurance Company’s petition to compel National Indemnity Company (“NICO”) to submit to arbitration. While the court’s order does not provide the basis for its ruling and only refers to the reasons set forth on the record, the issues were extensively analyzed in the parties’ briefing. The core issue was whether NICO, which was not a signatory to the reinsurance agreements between Transatlantic and AIG, should be compelled to arbitrate under those agreements’ arbitration provisions. Transatlantic argued that NICO was bound by the reinsurance agreements because it substituted itself for AIG by virtue of the Loss Portfolio Transfer wherein AIG to transferred NICO its asbestos-related liabilities which Transatlantic reinsured. According to Transatlantic, the principles of “direct benefits estoppel” required NICO to arbitrate under the reinsurance agreements in light of the benefits enjoyed by NICO as a result of those agreements.
