Jonathan Bank and Matthew Murphy | Locke Lord | November 1, 2019
A federal court in New York recently held that an arbitration panel retained the right to resolve any dispute arising out of an arbitration award. In Chicago Insurance Company v. General Reinsurance Corporation et al., no. 18-cv-10450, 2019 WL 5387819 (S.D.N.Y. Oct. 22, 2019), Chicago Insurance Company and its reinsurers disputed the reinsurers’ share of a settlement agreement that Chicago entered into with its insured with respect to the insured’s liability arising out of asbestos claims.
The panel rejected Chicago’s billing scheme and in 2017 it issued a final award for the reinsurers. In the final award, the panel retained the right to resolve disputes arising out of the award. In 2018, Chicago submitted a new bill to the reinsurers that it claimed was prepared in accordance with the 2017 final award. The reinsurers rejected the allocation and submitted the issue to the panel to resolve the issue. A majority of the panel agreed that the dispute arose out of the 2017 final award (Chicago’s party-appointed arbitrator wrote separately that the panel did not have a jurisdictional basis to address the dispute).
Chicago commenced a new, separate arbitration and filed a motion to compel the reinsurers to participate in the new arbitration. In response, the reinsurers filed a cross-motion to stay the new arbitration seeking a declaration that the 2017 panel had the requisite jurisdiction to resolve the dispute. The court observed that the issue of whether the 2017 panel’s retention of jurisdiction over disputes arising out of the 2017 final award was an issue for the court to decide. The court, noting that Chicago claimed that the new bill was prepared in accordance with the protocols set forth in the 2017 final award, agreed with the reinsurers that the 2017 panel expressly retained jurisdiction to resolve dispute arising out of the final award.
The decision is a reminder that if a panel retains jurisdiction to resolve subsequent issues arising out of a final award, courts will not join the chorus, and will instead permit the panel to finish the song.