Arrowood Indem. Co. v. Trustmark Ins. Co.

Issue Discussed: Functus Officio

Submitted by Linsey M. Routledge, Troy Shuman

Date Promulgated: March 29, 2013

Arrowood Indem. Co. v. Trustmark Ins. Co., (938 F. Supp. 2d 267)

Case Number: 3:03-cv-1000

Court: United States District Court for the District of Connecticut

Issue Decided:  Is the arbitration panel functus officio once it resolves all ambiguities in its award?

Short Answer:  Yes. The Panel is functus officio and does not have the power to respond to a court’s questions seeking clarification of the award.

Fire and Casualty Insurance Company (“FCIC”) reinsured UniCARE. Trustmark Insurance Company (“Trustmark”), under a series of retrocessional agreements, in turn, agreed to reinsure FCIC’s UniCARE liability.  After FCIC submitted certain billings to Trustmark for payments it had made to UniCARE, Trustmark disputed whether the payments were covered under the parties’ retrocession agreements and disputed its future obligations under those agreements. These issues were submitted to arbitration. In May 2003, the arbitration Panel issued an award finding that due to misallocation of claims, Trustmark owed FCIC about $6 million. The Award was confirmed in July 2003.

In 2006, a dispute arose regarding whether or not Trustmark had complied with the Panel’s order. The Court found an ambiguity in the Award and remanded to the Panel for clarification. The Panel clarified the Award and the Court confirmed the Amended Award on June 1, 2007. In 2008, another dispute arose regarding Trustmark’s duties. Again, the Court sought clarification from the arbitration panel via remand.

The Panel issued a clarification of its award. An evidentiary hearing followed before the court to determine if contempt was appropriate.

In addressing whether or not it had jurisdiction to decide the contempt and evidentiary matters, the Court noted that Section 10 of the Federal Arbitration Act (FAA) limited its authority. Pursuant to the FAA, the Court only had a three-month window to modify the award (which had passed) and the attempt to “enforce” the Award required interpretation of the Award. The Court found that after the first clarification of the Award and confirmation of the Amended Award, the Panel had issued a final award and was functus officio. The panel was therefore, without authority to issue the second clarification, which amounted to an advisory opinion as to the meaning of its prior awards rather than a correction or clarification.

[1] Linsey M. Routledge is Senior Counsel and Troy Shuman is an Associate at Clyde & Co US LLP.