Court Confirms Reinsurance Arbitration Award, Rejecting Numerous Procedural Challenges

Court Confirms Reinsurance Arbitration Award, Rejecting Numerous Procedural Challenges

When a dispute arose over the allocation and payment of losses under a reinsurance agreement pursuant to which Global International Reinsurance Company agreed to reinsure TIG Insurance Company, the parties took their dispute to arbitration. An arbitrator granted TIG’s motion for partial summary judgment, finding that Global had released its right to audit and dispute certain claims. The dispute arose out of transactions and claims which had been the subject of a prior arbitration and settlement agreement. The parties disagreed as to their current claim audit rights and payment obligations under the reinsurance agreement and the prior settlement agreement. The arbitrator granted partial summary judgment based upon an interpretation of the various agreements and the prior arbitration award, after four hours of oral argument but no evidentiary hearing.

Global sought the vacation of the award, contending that it had been denied a fundamentally fair hearing because the arbitrator had refused to hear evidence, disregarded the standards of summary judgment, and resolved material factual disputes without discovery or an evidentiary hearing, in violation of the standards contained in Section 10(a)(3) of the Federal Arbitration Act. The district court confirmed the award, noting: (1) that the settlement agreement gave the arbitrator the authority to resolve “any dispute” arising from or relating to the settlement agreement and other agreements; (2) that arbitrators have “great latitude to determine the procedures governing their proceedings and to restrict or control evidentiary proceedings;” and (3) that a court has very narrow authority to vacate arbitration awards, even if it disagrees with the merits of the arbitrator’s decision, so long as there is a “barely colorable justification for the outcome reached.” The court found that the arbitrator had acted within the scope of the authority delegated by the very broad provision and within the scope of his broad authority to manage the arbitration process. This opinion illustrates the expansive authority that arbitrators have to manage and conclude arbitrations. Global Int’l. Reinsur. Co. v. TIG Insur. Co., Case No. 08-7338 (USDC S.D.N.Y. Jan. 20, 2009).

© Copyright 2008 by Roland Goss and Jorden Burt LLP. All rights reserved. Reprinted with permission. This blog originally appeared on the Reinsurance Focus Blog.

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