Global International Reinsurance Co. v. TIG Insurance Co.

Issue Discussed: Power of Arbitrators

Submitted by Eric A. Haab, Kerry Slade

Date Promulgated: January 21, 2009

Issue Decided: Whether an arbitrator abuses his discretion and exceeds his authority by deciding a motion for summary judgment without discovery and an evidentiary hearing, and based on a document upon which the movant did not rely.

In Global International Reinsurance Company v. TIG Insurance Company, the Southern District of New York held that an arbitrator need not order discovery and hold an evidentiary hearing in order to decide a motion for summary judgment after receiving documents submitted by the parties and hearing oral argument on the motion. The arbitrator was within his discretion to find that the documents were clear on their face and he did not exceed his authority by basing the decision in part on a Settlement Agreement that the movant did not submit as evidence or rely upon.

Background

In a prior arbitration between the parties, the arbitral panel ruled that Global could only apply a sublimit to its exposure to losses emanating from a specific unit of TIG’s business, and instructed TIG to use certain coding definitions when submitting losses arising from the sublimit unit. A Settlement Agreement between Global and TIG provided that losses incurred from 2003 onward were reviewable for proper coding under the panel’s instructions. Global subsequently sought review of pre-2003 claims, and TIG agreed in “good faith” to allow Global to review specific pre-2003 claims subject to a renewed agreement that no other claims prior to 2003 would be reviewable in the future.

In 2007, Global commenced arbitration against TIG, seeking enforcement of its rights to audit pre-2003 claims. TIG moved for partial summary judgment to bar Global from challenging any losses reported before 2003. TIG based its motion on the post-settlement agreement, rather than the Settlement Agreement itself. The parties briefed the motion and submitted numerous exhibits to the arbitrator, who heard 4 hours of oral argument on the issue. The arbitrator subsequently granted TIG’s motion with respect to the right to audit pre-2003 claims and granted Global’s cross-motion for an audit limited to post-2002 claims. Global petitioned the court to vacate the Award in part, arguing that it was denied a fundamentally fair hearing because the arbitrator refused to hear evidence and resolved material factual disputes without discovery or an evidentiary hearing.

Holding

The court held that the arbitrator acted within his discretion in ruling on TIG’s motion for summary judgment. Because arbitral fact-finding is not expected to be as complete and formal as judicial fact-finding, the arbitrator was free to decide that further testimony and extrinsic evidence were unnecessary.

Global’s argument that the arbitrator disregarded the proper standards for summary judgment was also rejected. Arbitrators are not required to detail the standards used when ruling on motions and may use “an informal variation” of summary judgment procedures. Global had an adequate opportunity to present all evidence and arguments and no more was required.

The court also rejected Global’s contention that the arbitrator exceeded his authority by basing the decision in part on the Settlement Agreement, rather than the subsequent agreement on which TIG founded its motion. The Court reiterated the Second Circuit’s policy of construing the grounds to vacate an award under the Federal Arbitration Act narrowly and held that the Settlement Agreement gave the arbitrator broad authority to resolve any dispute relating to or arising out of the Agreement. It was proper for the arbitrator to consider the terms of the Settlement Agreement, which Global itself submitted as evidence, despite the fact that TIG did not rely on that Agreement in support of its motion.

*Eric Haab and Kerry Slade are partner and associate, respectively, in the insurance/reinsurance group of Lovells LLP. They each represent cedents and reinsurers in disputes involving a wide variety of issues.