Certain Underwriters at LLoyds, London v. Parish of LaFourche

Background

Petitioners, described as a collection of insurance syndicates, issued the Parish of Lafourche a commercial property insurance policy covering buildings owned by the Parish. The policy contains a broad arbitration clause covering matters related to the insurance and policy. It requires arbitration in New York under New York law.

The policy gives the parties 30 days to agree on one arbitrator. If they cannot agree, each party appoints an arbitrator. If those arbitrators fail to agree, they must jointly appoint an umpire. If they cannot agree on the umpire, either arbitrator may ask a New York judge to select one.

The parties are arbitrating claims for damage caused by Hurricane Ida, which struck Lafourche Parish on August 29, 2021. Petitioners asked the court to appoint an umpire under Section 5 of the Federal Arbitration Act. That provision requires courts to follow the appointment method in the parties’ arbitration agreement and permits court appointment when the agreement’s process has failed or there has been a lapse in the appointment process.

Court’s Analysis

The court relied on an earlier decision involving the same petitioner and an identical arbitration clause. That decision held that the arbitrators must first fail to agree on an issue within their authority—specifically, an issue concerning the underlying dispute—before an umpire may be appointed.

Here, the petition suggested that after each party appointed an arbitrator, the arbitrators went directly to trying to agree on an umpire rather than considering the insurance dispute. Because the arbitrators had not yet failed to agree on the underlying matter in dispute, the required condition for court appointment of an umpire had not occurred. The court also stated that a separate federal statute concerning appointment of arbitrators did not authorize appointment in circumstances beyond those allowed by Section 5 of the Federal Arbitration Act.

Disposition

The court denied the request for appointment of an umpire and dismissed the petition without prejudice because the request was premature. The Parish’s motion to stay the action was denied as moot. The Clerk was directed to terminate the pending motions and close the case.