A federal court in Georgia held that arbitration proceedings regarding a reinsurance contract could not be consolidated under the Federal Arbitration Act without an express contractual grant and that a dispute over contractual prerequisites to arbitration were for the arbitrators and not the court to decide. Ga. Cas. & Sur. Co. v. Excalibur Reinsurance Corp., 2014 WL 996388 (N.D. Ga. Mar. 13, 2014).
A party was found liable in a tort claim, but the judgment against it was reversed on appeal. The defendant’s liability insurer filed a claim with its reinsurer for defense expenses in the action against its insured. The reinsurer denied the claim, arguing that the insurer’s proper avenue for recovery of the expenses should be a malpractice suit against the insured’s defense counsel for failing to move for summary judgment. The two reinsurance contracts at issue contained arbitration provisions, and separate arbitration proceedings were initiated. The ceding insurer sued its reinsurer for breach of contract and moved for an order to consolidate the arbitration proceedings and order arbitration. The reinsurer argued that the arbitration proceedings should be stayed pending resolution of the insurer’s potential malpractice claim against the insured’s defense counsel, and moved to dismiss the ceding insurer’s suit.
The district court dismissed the ceding insurer’s lawsuit and held that separate arbitration proceedings for each reinsurance contract are the appropriate avenues to resolve the dispute, but that the decision to stay the arbitration proceedings is a decision for the arbitrators. The district court found that it was not appropriate to consolidate the arbitrations because at least one of the reinsurance contracts was governed by the Federal Arbitration Act, which does not permit consolidation of arbitration where the contracts do not contain an express contractual provision allowing for it, and neither did. The district court also concluded that the arbitrators, and not the court, must determine whether resolution of the potential malpractice claim was required before arbitration because the question goes to the merits of the dispute between the parties, which must be decided through arbitration.