R&Q Reinsurance Co. v. American Motorist Ins. Co. (United States District Court, Northern District of Illinois, October 14, 2010)
Petitioner sought to vacate an underlying arbitration award stemming from a reinsurance contract dispute between R&Q and Lumbermens regarding a series of Blanket Excess of Loss Reinsurance Contracts. Lumbermens demanded arbitration against R&Q seeking to recover amounts billed under the contract relating to three claims totaling approximately $1.5 million.
The Panel's Final Award, which it issued on February 5, 2010, closely resembled the draft award Lumbermens submitted. The Panel found in favor of Lumbermens and awarded it $1,454,989.80, plus interest. The Panel did not include a specific interest figure in its Final Award. Instead, the Panel ordered Lumbermens to provide R&Q and the Panel "with a written worksheet accounting of interest so awarded" within 5 business days. The Panel gave R&Q an additional 5 business days to "to review and comment upon the amounts claimed." The Final Award further stated that "[t]he panel will then issue an Order Directing Payment of Interest Awarded that, once issued, will form part of and be incorporated by reference into this Final Award." In its Final Award, the Panel cited to the relevant contractual clause in the Treaties, the Aggregate Extension Clause that it found required payment of the $1,454,989 award by R&Q.
On March 15, 2010, after receiving and reviewing the documentation regarding the appropriate interest calculation, the Panel issued an "Order Directing Payment of Interest Awarded." In that order, the Panel directed R&Q to pay Lumbermens $350,000.00 in interest. The Panel further stated that "[a]s provided by the Final Award, this Order forms a part of and is hereby incorporated into the Final Award." The Panel did not provide any further explanation for how it arrived at the $350,000.00 interest.
R&Q argued that the February 5, 2010 Final Award and the March 15, 2010 order must be vacated pursuant to 9 U.S.C. § 10(a)(3) and 10(a)(4) because R&Q was prejudiced by the Panel's misconduct and its decision to exceed its powers by failing and refusing to issue a "reasoned award" pursuant to the agreement and instructions of the parties. R&Q further argues that the March 15, 2010 order violated the terms of the February 5, 2010 Final Award by incorrectly calculating Lumbermens' interest.
As an initial matter, the court held that R&Q’s motion to vacate the award was untimely as it exceeded the three-month deadline prescribed by the statute. Specifically, the motion to vacate was served on May 6, 2010, one day after the three-month deadline as set forth in Section 12. R&Q argued that the three months should be interpreted as ninety days; however, the court disagreed holding that the statute unambiguously prescribes three months, noting the period must be applied as written pursuant to applicable 7th Circuit case law. Thus, the motion was ruled untimely.
Notwithstanding the foregoing, the court also ruled on the merits of the motion holding that the Panel’s award fell within the broad spectrum of a reasoned award. Specifically, R&Q argued that its motion to vacate should be granted because (1) the Panel failed to issue a "reasoned award"; (2) in failing to issue a "reasoned award" the panel was guilty of misconduct and exceeded its powers; and (3) R&Q was prejudiced by the Panel's misconduct. In noting the reasonableness of the decision, the court concluded that the final award did more than simply provided a one-line finding that one party won and one party lost, but rather included six paragraphs of contractual clauses and factual findings that drove the award decision. As such, the court held the Panel issued a “reasoned award,” and further, there was no evidence of misbehavior on the part of the Panel under Section 10(a)(3).
For a copy of the decision click here
Paul Steck and Daniel Gerber
https://www.goldbergsegalla.com/attorneys/Steck.html
https://www.goldbergsegalla.com/attorneys/Gerber.html
Case provided courtesy of Lexis