(Article from Insurance Law Alert, November 2025)
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Holding
A Michigan district court correctly dismissed a cedent’s suit against a reinsurer seeking a declaration as to defense costs because the cedent had already litigated and lost the same issue in arbitration with a different reinsurer. Amerisure Mut. Ins. Co. v. Swiss Reinsurance Am. Corp., 2025 U.S. App. LEXIS 29098 (6th Cir. Nov. 4, 2025).
Background
Amerisure purchased facultative reinsurance from Swiss Re and non-party Allstate to help cover primary and umbrella policies that Amerisure issued to Armstrong, a building material manufacturer. When thousands of claimants sued Armstrong for asbestos-related injuries, Amerisure paid for Armstrong’s defense and losses. Importantly, Amerisure paid for Armstrong’s defense costs under umbrella policies in addition to (rather than within) the umbrella policy limits.
When Amerisure sought reimbursement from its reinsurers for the defense costs, the reinsurers refused, arguing that because the umbrella policies did not contractually obligate Amerisure to cover those costs, the payments were not covered by the facultative certificates. In an arbitration between Amerisure and non-party Allstate, the panel ruled that the umbrella policies only required Amerisure to pay defense costs within limits and therefore that Allstate was not liable for above-limit payments. Amerisure sought and received judicial confirmation of the award, which it deemed favorable overall notwithstanding the defense cost issue.
Thereafter, Amerisure filed a complaint against Swiss Re, seeking a declaration that it was entitled to recover defense costs based on the same umbrella policies at issue in the Allstate arbitration. A Michigan district court granted Swiss Re’s summary judgment motion, ruling that collateral estoppel precluded Amerisure from litigating the defense cost issue again. The Sixth Circuit affirmed.
Decision
Applying Michigan and federal law governing estoppel, which the court deemed to be substantially the same, the Sixth Circuit held that the relevant issue was “actually litigated” in arbitration and that Amerisure had a “full and fair opportunity” to litigate the issue.
Amerisure argued that the defense cost issue was not actually litigated in the Allstate arbitration because the arbitration panel did not specifically address it in its interim or final award. The Sixth Circuit rejected this assertion, explaining that Amerisure presented the argument before the panel and that, in any event, an arbitration award need not explicitly address an issue for preclusion to apply. Rather, “[s]o long as the arbitration record supports the conclusion that the arbitration panel’s decision necessarily decided an issue, we may apply collateral estoppel.”
The Sixth Circuit also concluded that the issue was “fully and fairly” litigated during arbitration. In so ruling, the court rejected Amerisure’s contention that it was unable to obtain judicial review of the arbitration award because the certificates provided that the panel’s decision was final and binding. The court emphasized that Amerisure agreed to an arbitration process that lacked appellate review and alternatively, that Amerisure could have moved to vacate the award.
Finally, while the court agreed with Amerisure that mutuality of estoppel was lacking because Swiss Re was not a party to the Allstate arbitration, it concluded that the lack of mutuality was not outcome determinative. The court explained that mutuality is not required where, as here, estoppel is asserted defensively (i.e., by a defendant against a plaintiff who was a party in the prior action).
Comments
The Sixth Circuit expressly declined to find, as a matter of first impression, that limited opportunities for appellate review in arbitration render it inherently unfair to give preclusive power to arbitration awards. While the court acknowledged the distinctions between arbitration and judicial proceedings, including the “honorable engagement” clause in most arbitration agreements, it deemed the two processes “substantially similar” for purposes of estoppel.