Michigan Federal Court Holds Arbitrator to Decide Arbitrability Timeliness Dispute

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Who decides whether an arbitration should go forward is often a controversial issue. Is it the court or is it the arbitration panel? In a recent case, a Michigan federal court determined that it was the arbitrators that had to decide whether a limitations provision in a reinsurance contract precluded arbitration.

In Alliance Health and Life Insurance Co. v. American National Insurance Co., No. 20-cv-12479 (E.D. Mich. Aug. 31, 2021), a cedent commenced an action in federal court to recover reinsurance proceeds under a Medical Excess Reinsurance Agreement. The reinsurance contract contained a mandatory arbitration clause but it also provided that no arbitration could be commenced more than three years after the effective date of the reinsurance contract. In this case, the arbitration was commenced after three years and the cedent claimed that because of that the arbitration provision no longer applied.

The reinsurer moved to dismiss the complaint in light of the mandatory arbitration provision. In granting the reinsurer’s motion to dismiss, the court held that because the cedent did not dispute that it consented to arbitration when it signed the reinsurance contract, it was bound by the arbitration provision. Because time limitations are a matter of procedure under Supreme Court precedent, and because there was no provision in the reinsurance agreement that required the court to determine questions of timeliness, the presumption in favor of arbitration stands and the matter must go to arbitration. The broad scope of the arbitration provisions was also a factor (any dispute arising concerning the interpretation of the contract or any transaction under the contract whether before or after termination must be submitted to arbitration).

This case is yet another example of the deference given by the courts to arbitration, especially where the arbitration provision is broad.

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