Assume you are a reinsurer and you receive a number of arbitration demands. At least one of the demands pertains to a claim (“OLD CLAIM”) where you denied reinsurance coverage nearly 10 years ago. You agree to consolidate the arbitrations.
You also name your arbitrator as a precaution because the treaties require that an arbitrator be named quickly and you still have to address other disputes raised in the arbitration demands. Before an umpire is selected, you apply to stay the arbitration under New York law for just the OLD CLAIM. You make this application because the arbitration clause of your treaty provides that the “the arbitration laws of New York State shall govern such arbitration” and New York Arbitration Law (Article 75 of the CPLR) explicitly provides that a court (and not an arbitration panel) is to decide whether claims should be time barred.
ROM Re v. Continental involved this exact scenario and our office was involved in two separate appeals decided by the New York Appellate Division, First Department, before the matter eventually went back to the arbitration panel to decide whether the OLD CLAIM was time-barred.
The lower court initially held that an arbitration panel was to decide the issue of timeliness because the court misread the relevant phrase in the arbitration clause and thought it merely stated that New York law, and not New York arbitration law, would govern the arbitration. The lower court relied on the decision of New York’s highest state court in Diamond Waterproofing Systems, Inc. v. Liberty Owners Corp., 826 N.E. 2d 802 (N.Y. 2005). In Diamond Waterproofing, the New York Court of Appeals held that an agreement that merely provided that it “shall be governed by the law of [New York]” did not express an intent to have New York law govern enforcement. The Court reasoned that “[i]n the absence of more critical [2] language concerning enforcement . . . all controversies, including issues of timeliness, are subjects for arbitration.” 4 N.Y.3d at 253.
We filed an appeal on behalf of ROM Re. We noted that, in contrast to Diamond Waterproofing, here the parties explicitly contracted for New York arbitration law to apply to the enforcement of any dispute between the parties by agreeing to have “the arbitration laws of New York State” govern the arbitration. The appellate court agreed and reversed the lower court. Thus, the case was remanded back to the lower court so the court could determine whether the OLD CLAIM was time-barred. ROM Reinsurance Mgmt. Co. v. Cont’l Ins. Co., 115 A.D.3d 480 (1st Dept. 2014).
The Court reasoned that “[i]n the absence of more critical language concerning enforcement . . . all controversies, including issues of timeliness, are subjects for arbitration.”
On remand, however, the lower court now found that ROM Re had “participated” in the arbitration by naming its arbitrator before applying to stay the arbitration, even though the parties had not yet appointed an umpire. Thus, ROM Re lost its right to apply to stay arbitration – New York Arbitration Law only permits a party to apply to stay arbitration if it has not “participated” in the arbitration. We filed another appeal on behalf of ROM Re. The appellate court affirmed the lower court because ROM Re had “participated in the arbitrator selection process, even though they were undoubtedly aware of their statute of limitations claim.” ROM Reinsurance Mgmt. Co. v. Cont’l Ins. Co., 128 A.D.3d 570 (1st Dept. 2015).
For the full article, refer to page 27 in the Summer 2016 issue. https://www.airroc.org/assets/docs/matters/airroc%20summer%202016%20vol%2012%20no%202.pdf
