Reinsurance Focus

The Eastern District of New York recently adopted the recommendation of a magistrate judge to grant a defendant-insurer’s motion to stay adjudication and compel arbitration, whilst also providing a refresher course in arbitration clause interpretation principles. First, the court dissected the arbitration clause’s condition precedent, holding that a provision requiring arbitration following the request of either party is a mandatory arbitration clause. The requirement that a dispute be submitted to arbitration within thirty days of such request “merely sets a time limit for commencement of an arbitration proceeding.” Moreover, whether a condition precedent has been satisfied is a procedural question presumptively for an arbitrator to decide, not a substantive question, such as whether the clause applies to a particular type of controversy, for a judge. Second, the court held that whether the motion to compel complied with applicable arbitration rules was inapplicable because those rules “do not come into play until an order is entered compelling arbitration or the parties agree to do so.” Third, noting the presumption of arbitrability, the court distinguished Second Circuit case law addressing an instance where a subsequent agreement to adjudicate created ambiguity in the parties’ intentions, and held that, here, “there is no subsequent agreement that abrogates th[e] agreement to arbitrate.” Lastly, the court analyzed a New York choice-of-law provision to determine the arbitrability of a punitive damages claim, holding that the provision should be read to encompass substantive principles that New York would apply, not special rules in New York that may limit the authority of arbitrators with respect to claims such as punitive damages. MQDC, Inc. v. Steadfast Ins. Co., Case No. 12-CV-1424 (ERK) (MDG) (E.D.N.Y. Dec. 6, 2013).

This post written by Kyle Whitehead.

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