Insurance Settlement’s Arbitration Provision Resolves Disputes Regarding Asbestos Claims
Arbitration exists for the sole purpose of limiting disputes and avoiding long, drawn-out lawsuits. When major litigation is resolved involving multiple parties, like asbestos litigation, prudent litigators – when they settle – include an arbitration clause to avoid further expensive litigation.
Insurance Company of North America, Inc., Century Indemnity Company, and ACE Property and Casualty Insurance Company (collectively, “INA”) moved the USDC to confirm an arbitration award issued on January 6, 2020 (the “Award”). In Syngenta Crop Protection, LLC v. Insurance Company Of North America, Inc., Century Indemnity Company, and Ace Property And Casualty Insurance Company, 18cv715(DLC), United States District Court Southern District Of New York (April 23, 2021)
This action concerned an insurance coverage dispute over the relationship between a set of decades-old insurance policies and a subsequent settlement agreement. Plaintiff Syngenta Crop Protection, LLC (“Syngenta”) sought coverage under these policies for claims involving asbestos exposure of contract workers associated with its predecessor. INA asserts that those asbestos-related claims were released by a 1999 settlement agreement (the “1999 Settlement”).
INA filed a demand for arbitration with the American Arbitration Association (“AAA”) pursuant to the 1999 Settlement. Syngenta sued seeking to enjoin arbitration. The court’s opinion stayed this action pending arbitration, noting that the arbitration clause in the 1999 Settlement requires that “any dispute with respect to” the settlement be resolved through arbitration. The parties thereafter participated in arbitration and the Arbitrator issued the Award on January 6, 2020.
INA filed this motion to confirm the Award. INA sought immediate confirmation of the Award.
The Federal Arbitration Act provides in relevant part that:
“If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration . . . then at any time within one year after the award is made any party to the arbitration may apply to the court . . . for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of [the FAA].”
The USDC noted that normally, confirmation of an arbitration award is a summary proceeding that merely makes what is already a final arbitration award a judgment of the court, and the court must grant the award unless the award is vacated, modified, or corrected.
A court’s review of an arbitration award is severely limited in view of the strong deference courts afford to the arbitral process. This deference promotes the twin goals of arbitration, namely, settling disputes efficiently and avoiding long and expensive litigation. Consequently, the burden of proof necessary to avoid confirmation of an arbitration award is very high, and a district court will enforce the award as long as there is a barely colorable justification for the outcome reached.
Still, when asked to confirm an ambiguous award, the district court should instead remand to the arbitrators for clarification. INA timely filed a motion to confirm the Award. INA argued that the Award should be confirmed because it has not been vacated, modified, or corrected. The USDC concluded that INA is correct, and the Award must be confirmed.
The Award allowed Syngenta to obtain insurance coverage for claimants in a limited circumstance: “employment records must confirm that the individual [claimant] was exclusively employed for not less than 30 consecutive work days while working on [Syngenta’s predecessor’s] premises.” Syngenta contends that two phrases in the Award — “employment records” and “30 consecutive workdays” — are ambiguous.
Syngenta, however, did not move to vacate, modify, or correct the Award. Nor has it shown that remand to the Arbitrator is warranted because the Award is ambiguous. Syngenta has not shown that either phrase to which it points is “susceptible to multiple meanings” or has engendered any actual confusion that has occurred since the issuance of the Award over a year ago.
Courts are not required to find contract language ambiguous where the interpretation urged by one party would strain the contract language beyond its reasonable and ordinary meaning. Indeed, the Award confirms the proper interpretation when it repeatedly refers to claimants as “non-employee contractors” or “non-employee independent contractors.”
Additionally, Syngenta argued that the phrase “30 consecutive workdays” is ambiguous because it does not contemplate cases where the available evidence for a claimant reflects a gap in work but does not indicate that the claimant actually worked elsewhere during that gap. This argument failed because it does not make the phrase “30 consecutive workdays” ambiguous. A gap between workdays indicates that the workdays are no longer consecutive.
The USDC concluded that Syngenta had not demonstrated that the phrase is subject to multiple interpretations. To the extent the parties have a dispute regarding how the Award applies to a specific claim, the parties may return to arbitration to resolve the dispute. Therefore, INA’s motion to confirm the Award was granted.
This case established the wisdom of the parties in 1999 when they entered into a settlement agreement to include an arbitration provision. The dispute was resolved by the arbitrator with an opinion that was sufficiently clear and unambiguous to allow it to be followed by the parties and allowed them to avoid unneeded litigation. It would appear, especially with settlements of mass tort claims, to include an arbitration provision to allow disputes over the agreement to be resolved by arbitration. Otherwise, as did Syngenta, lawsuits would continue to be filed and money and time wasted and turn a settlement into a never ending story.
© 2021 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost
equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and firstname.lastname@example.org.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
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