7th Circuit Affirms Arbitration Award Despite Substitution of Arbitrator

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WellPoint, Inc. v. John Hancock Life Insurance Co.

(7th Circuit, August 7, 2009)


Pursuant to an arbitration clause in the transaction agreement, two insurers were required to submit their dispute to an arbitration panel to determine their rights and obligations under the contract.  Each insurer selected an arbitrator and a third one was selected by the American Arbitration Association as the “umpire” arbitrator.  However, before the arbitration was set to begin, the arbitrator chosen by on one of the parities resigned.  A replacement was chosen from a list of three arbitrators selected by the remaining panel.


The district court confirmed the arbitration award, and the losing insurer appealed, arguing that since the arbitration agreement did not expressly address the process for replacing a panel member, the entire arbitration process should begin anew.


The Court of Appeals rejected the argument and held that there is no such inflexible and wasteful rule in the law of arbitration.  In addition, the Court of Appeals held that the replacement process was suggested by the appealing party’s arbitrator and an objection was never raised until the sum was awarded.


For a copy of this decision click here


By Sarah X. Fang and Richard J. Cohen