No one should doubt that the federal policy in favor of arbitration is broad and deep. It is evident in how difficult it is to vacate an arbitration award or avoid having to arbitrate a dispute where there is a broad arbitration provision. A recent case makes this even clearer.
The parties to a series of reinsurance treaties arbitrated the extent of the reinsurer’s obligations to respond to an underlying asbestos settlement. A final arbitration award was issued and confirmed by the court. Years later, the cedent billed the reinsurer for asbestos claims for the same insured under the same policy. The reinsurer rejected the billings claiming that the matters had been resolved in the earlier arbitration and brought suit to declare that it had no further obligation. The cedent, which had demanded arbitration on the unpaid billings, sought to compel arbitration.
The court granted the motion to compel arbitration and dismissed, without prejudice, the declaratory and injunction action brought by the reinsurer. Emplrs Ins. of Wausau v. Cont’l Cas. Co., No. 15-cv-226-wme, 2016 U.S. Dist. LEXIS 18850 (W.D. Wisc. Feb. 17, 2016). Why? Because of the presumption in favor of arbitration under the FAA.
The court found that the broad arbitration clause required any dispute be determined by the arbitrators in the first instance. That included whether the cedent was in compliance with the earlier arbitration award or the affect of the prior award on the unpaid billings. Whether, as the reinsurer characterized it, the cedent was trying to compel the reinsurer to re-arbitrate a dispute that had been finally determined years earlier or whether the reinsurer’s failure to pay the new billings was a new and different dispute, were matters for the arbitrators to determine, not the court.
The court made clear that it was not deciding whether the dispute was entitled to a new arbitration or even re-arbitration of the prior award. It simply concluded that, as with all other disputes between the parties under the treaties, the arbitrators should decide these issues and whether the prior award had any preclusive effect.
Optically, having resolved a dispute in a 2004 arbitration only to have billings in 2015 allegedly from the same underlying policy result in a new arbitration may raise a few eyebrows. Nevertheless, where the parties bargained for broad arbitration of any dispute arising from the reinsurance treaties or the interpretation of the treaties or any transactions involved, requiring that the parties submit a dispute about subsequent billings and whether a prior arbitration award precludes those billings to arbitration may not be out of line with the parties’ intent and is certainly consistent with the FAA.