Power to the Arbitrators

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In the beginning, arbitration was unfavored and the courts intervened with frequency. Then came the Federal Arbitration Act (“FAA”), which created a federal policy in favor of arbitration. This policy applies equally in federal or state court as long as the contract involves interstate commerce.

The courts, however, were still involved in gateway issues like whether there was a valid arbitration agreement entered into by the parties (arbitrability). But as case law on arbitrability developed, the courts found that where the parties delegated the authority to decide gateway issues like arbitrability to the arbitrator, it was then up to the arbitrator, and not the court, to determine those arbitrability questions in the arbitration. Sounds counterintuitive, but there you have it in a brief summary.

That brings us to a short decision by a New York intermediate appellate court highlighting this issue in an insurance arbitration context.

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