Limitation on When Arbitration Can Be Brought For Arbitrator to Decide

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Who decides whether a contractual time limitation in a reinsurance contract on when an arbitration can be brought applies to bar arbitration? In a recent case, the Sixth Circuit Court of Appeals affirmed a district court’s decision sending the matter to arbitration for the arbitrators to decide on whether or how the limitation provision will be applied.

In Alliance Health & Life Insurance Co. v. American National Insurance Co., No. 21-2995 (6th Cir. Jul. 22, 2022) (Not Recommended for Publication), the cedent sued the reinsurer in court for breach of their Medical Excess Reinsurance Agreement. The reinsurer moved to compel arbitration and to dismiss. The parties disputed whether a three-year limitation in the reinsurance agreement on commencing arbitration precluded arbitration. The district court dismissed the complaint after holding that the question was for the arbitrator in the first instance. The Sixth Circuit affirmed.

In affirming, the court addressed the issue of arbitrability and discussed the federal case law on the distinction between substantive and procedural questions of arbitrability. The court noted that time limitations have been considered procedural and therefore for the arbitrator to decide.

As to the cedent’s arguments, the court stated that “[b]ecause [the cedent] fails to appreciate the distinction between substantive and procedural questions of arbitrability, its arguments as to who decides miss the mark.” The court rejected the cedent’s claim that the arbitration clause was narrow, noting that “the clause covers ‘any dispute . . . with reference to the interpretation of this Agreement or their rights with respect to any transaction involved.'” This, the court held, encompassed “the determination of whether the contractual time limit precludes arbitration.”

As most courts have decided, procedural issues, such as time limitations, are for the arbitrator to decide and not the courts.

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