In re McKenna, Long & Aldridge, LLP v. Ironshore Spec. Ins. Co., No. 65140717 (N.Y. App. Div., 1st Dep’t Oct. 17, 2019).
In a non-reinsurance case, petitions to vacate a final arbitration award in favor of an insurer were denied by the motion court and affirmed on appeal. The parties seeking to vacate the award argued that the arbitration panel exceeded its authority in making the award or issued the award in manifest disregard of the law. In affirming the denial of the petitions to vacate, the court stated that the language of the arbitration clause referring to “any controversy, claim or dispute arising in connection with [the insurance] policy” reflected “such a broad grant of power to the arbitrators as to evidence the parties’ clear intent to arbitrate issues of arbitrability.”
Although hard to tell from this opinion, it appears that one of the parties, who was held by a federal court to be an intended thirdparty beneficiary of the insurance policy, argued that it could not be compelled to arbitrate. The panel’s final award clearly affected that party, which is why the petition to vacate was filed. In affirming, the appellate court upheld the arbitrators’ decision to rule on whether that party was subject to the arbitration clause in the policy based on the broad arbitration provision.
As to manifest disregard of the law, the court held that the petitioners failed to show that the arbitration panel knew of a governing legal principle that was well defined, explicit and clearly applicable, yet refused to apply it or ignored it altogether. The court found that the arbitration panel carefully considered the operative language in the relevant agreements and the law before reaching its conclusions. For example, the court found that, contrary to the arguments, the panel considered the applicability of Delaware law and a specific case and distinguished the case, concluding that it was not applicable. Notably, and consistent with cases under the FAA, the court concluded that the panel’s determination, at worst, was a mistake of law, which does not constitute manifest disregard and is not a ground for vacating an arbitration award.