TIG Insurance Company v. American Home Assurance Company, (18-CV-10183, S.D.N.Y. Feb. 7, 2020)

Issue Discussed: Arbitrability

Submitted by Suzanne Fetter

Date Promulgated: February 7, 2020

CaseTIG Insurance Company v. American Home Assurance Company, (18-CV-10183, S.D.N.Y. Feb. 7, 2020)

Issue Discussed: Arbitrability

Court: U.S. District Court for the Southern District of New York

Date Decided: Feb. 7, 2020

Issues Decided:  Whether the arbitrability of a dispute is determined by the terms of an arbitration agreement, or is an issue for judicial determination.

Submitted by: Suzanne R. Fetter, Fetter Company

American Home Assurance Company and New Hampshire Insurance Company (NHIC), (collectively, “Defendants” or “AIG”), entered into two reinsurance agreements (“Treaties”), with TIG Insurance Company in 1974 and 1976 (the “Agreements”).  The Agreements provided that disputes between the parties would be arbitrated before two arbitrators, “one to be chosen by each party and in the event of the arbitrators failing to agree, to the decision of an umpire to be chosen by the arbitrators.”

Granite State Insurance Company, an affiliated company of Defendants, though not a party to the Treaties, insured Foster Wheeler Corp, Crane Co., and Transamerica Corp. for asbestos related exposures, which were later presented to TIG for reimbursement.  Subsequently, several demands for arbitration were made on July 13, 2018, by American Home Group, NHIC, National Union and AIU Insurance Company.  After each party appointed an arbitrator per the terms of the Agreements, TIG objected to arbitration on the grounds that Granite State was not a party to the Treaties, and to support its refusal to pay the asbestos related claims, Plaintiff TIG filed an action in the Southern District of New York on November 1, 2018 to determine the issue of who should decide the threshold question of arbitrability.

The issue presented to the District Court by TIG was whether Defendants’ including NHIC’s demands for payment to TIG are determined by the written Treaties and whether the disputes fall within the scope of the Treaties.  TIG argued that the question of whether NHIC’s policies issued by Granite State fall under the terms of the Treaties, where Granite State is not a party to the Agreements, raises an issue of arbitrability.  TIG further argued that the arbitrability issue was an issue for the Court to decide, as opposed to an arbitration panel.

On January 3, 2019, Defendants filed a motion to compel arbitration and dismiss the Complaint.  On February 7, 2019, Defendants filed a motion to appoint umpires under the Federal Arbitration Act, 9 U.S.C., Section 5, to serve as neutral umpires in the disputes, and subsequently withdrew that Motion.

TIG argued to the District Court that the Arbitration Panel did not have the authority to grant AIG’s requested relief under the Treaties, and therefore the dispute concerning the billings should reside with the Court.  The Court, however, in a decision by Judge Vernon Broderick of the Southern District Court of New York, rejected this argument. The Court found that the Federal Arbitration Act “provides that an arbitration provision in a “contract evidencing a transaction involving commerce…shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract’.”  9 U.S.C. Section 2.  Moses H. Cone Memorial Hosp. v. Mercury Construction Corp., 460 U.S. 1, 24 (1983); see also AT&T Mobility LLC v. Concepcion,  563 U.S. 333, 346 (2011).

In the TIG case, Judge Broderick granted Defendants’ Motion to Compel Arbitration, and denied Defendants’ Motion to Dismiss claims against Granite State Insurance Co.  The Court found that the arbitration clauses created valid agreements to arbitrate, and that the arbitration clauses controlled the interpretation of the underlying Treaties at issue.  The question of whether the underlying demands for payment are covered by the Treaties is one of contract interpretation, not arbitrability, said Judge Broderick.  The Court also found that Plaintiff TIG brought the suit in good faith, and not for purposes of harassment or delay, and rejected Defendants’ claim for attorneys fees.