


Having received a favorable award, the reinsurer petitioned the federal court to confirm the award under the FAA and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). Even though the Director had commenced a private arbitration, the director moved to dismiss the petition to confirm, claiming that Illinois insurance law, through the McCarran-Ferguson Act, reverse preempted the ability of the court to hear the petition to confirm.

In denying the motion to dismiss, the court rejected each of the Director’s arguments and found that the court had jurisdiction to hear the petition to confirm. The court held that it had independent federal jurisdiction under the New York Convention (the successor reinsurer was a citizen of the UK and the liquidator or the cedent a citizen of Illinois), as well as diversity of citizenship. The court rejected the reverse preemption argument, finding that confirming an arbitration award does not require the court to construe any federal law in a way that invalidates, impairs or supersedes any state law. Notably, the court commented that “[t]he Director appears to have thought there was nothing inconsistent with arbitrating a claim that would eventually be dealt with in liquidation court right up until the panel ruled in Catalina’s favor.”

Given that the award already decided the liability and amount of damages, and had already perfected the reinsurer’s claim, the court held that confirming the award would not interfere with, and in fact was consistent with, the liquidation proceedings. The court rejected the argument that the FAA or the New York Convention were reverse preempted under McCarran-Ferguson because neither would invalidate, impair nor supersede Illinois’ insurance laws. The court also noted that, in confirming the award, the court was not called on to determine the priority of the reinsurer’s claim or engage in any other way with Illinois’ insurance or liquidation laws. All the court had to do was confirm or vacate the award and, with that decision, the Director was free to proceed before the liquidation court as they saw fit.