Chicago Ins. Co. v. General Reinsurance Corp., et al., No. 18-cv-10450, 2019 WL 5287819 (S.D.N.Y. Oct. 22, 2019)
Issue Discussed: Functus Officio Doctrine
Submitted by Robert W. DiUbaldo
Date Promulgated: October 21, 2019
Case: Chicago Ins. Co. v. General Reinsurance Corp., et al., No. 18-cv-10450, 2019 WL 5287819 (S.D.N.Y. Oct. 22, 2019)
Issue Discussed: Functus Officio Doctrine
Court: U.S. District Court for the Southern District of New York
Date Decided: October 21, 2019
Issues Decided: Whether the functus officio doctrine bars an arbitration panel from deciding a dispute between parties that arises from a prior dispute adjudicated by that panel.
Submitted by: Robert W. DiUbaldo, Shareholder, Carlton Fields, P.A.
General Reinsurance Corporation and SCOR Reinsurance Company (collectively, “Reinsurers”) reinsured Chicago Insurance Company under a second layer casualty excess reinsurance agreement (the “Agreement”). The Agreement provided that disputes between the parties would be arbitrated before three arbitrators. Chicago and an affiliated company insured Thorpe, which was an asbestos distributor and installer. After Thorpe filed for bankruptcy, Chicago and its affiliate reached an agreement with Thorpe to settle all liability under the relevant insurance policies. Chicago then billed the Reinsurers for a portion of the settlement payment. When the Reinsurers disputed the billing as presented, the matter was submitted to arbitration (the “2017 Arbitration”). The panel in the 2017 Arbitration ultimately rejected Chicago’s billing methodology for its settlement payment and issued a Final Award in favor of the Reinsurers. The 2017 Final Award also stated that the 2017 Arbitration panel “retain[ed] jurisdiction to resolve any dispute arising out of [the] Final Award.” Chicago did not move in court or otherwise to challenge the Final Award, including the portion in which the panel retained jurisdiction to address future disputes arising therefrom.
In September 2018, Chicago submitted a new billing to the Reinsurers related to the same billing at issue in the 2017 Arbitration, asserting that the new billing was prepared in accordance with certain claims protocols contained in the 2017 Final Award. Reinsurers rejected the new billing and alerted the 2017 Arbitration panel. The umpire advised the parties that the majority of the panel found that the panel had and would exercise jurisdiction to resolve any dispute concerning the new billing since it arose out of the Final Award. Chicago’s party-arbitrator did not participate in the panel’s decision based on his view that there was no jurisdictional basis to do so.
Thereafter, Chicago commenced a separate arbitration to resolve the dispute concerning the new billing. Reinsurers declined to proceed with the new arbitration based on the position that the 2017 Arbitration panel retained jurisdiction over the dispute. Chicago then filed a petition to compel the Reinsurers to arbitration before a new panel and to stay the arbitration before the 2017 Arbitration panel. The Reinsurers filed a cross-petition to stay the new arbitration and for declaratory relief providing that the 2017 Arbitration panel had jurisdiction to resolve the dispute.
Chicago argued that the 2017 Arbitration panel was functus officio, and therefore a new arbitration must take place under the Agreement to resolve the dispute concerning the new billing. The Court, however, found that functus officio did not apply because the 2017 Arbitration panel explicitly retained jurisdiction to resolve any dispute arising out of the Final Award, and that Chicago consented to this retention of jurisdiction when it chose not to dispute or seek to vacate the Final Award. Because functus officio “is applicable only once the arbitrator’s assigned duties have come to an end”, the Court found that the 2017 Arbitration panel’s duties “definitionally” had not ceased because the dispute on the new billing arose out of the 2017 Final Award, as acknowledged by Chicago when submitting that billing. Accordingly, the Court held that the 2017 Arbitration panel retained jurisdiction to adjudicate whether Chicago’s new billing comports with the panel’s Final Award, denied Chicago’s petition to compel arbitration and stay the arbitration before the 2017 panel, and granted Reinsurers’ cross-petition in full.
