Court: District Court, D. Massachusetts; November 5, 2014; Federal District Court
A reinsurance dispute between Nationwide Mutual Insurance Company and Liberty Mutual Insurance Company centers on the interpretation of contract terms regarding billing claims. Following an Arbitration Panel's decision on June 26, 2013, and subsequent confirmation by the Massachusetts Superior Court, the parties are again contesting contract language related to "new" claims. Nationwide has filed two motions: one to compel arbitration for these new claims and another to vacate the Arbitration Panel's clarification of its initial award.
The court partially grants and partially denies the motion to compel arbitration while allowing the motion to vacate. The core of the dispute involves Excess of Loss Reinsurance Contracts between 1972 and 1983, featuring arbitration clauses mandating disputes be resolved by a board of arbitration. A significant point of contention is the Access to Records Clause, which allows reinsurers access to relevant company records.
A specific dispute arose concerning claims related to Houdaille Industries, with Liberty alleging Nationwide failed to meet its obligations under the Treaties, while Nationwide claimed Liberty breached the Access to Records Clause. The Arbitration Panel's June 2013 ruling stated that the Access to Records provision and claims provisions are independent, and that Liberty must respond to requests for information in good faith within 60 days regarding future claims. Following this, Liberty resubmitted several unresolved claims, but instead of adopting coverage positions within the specified 60 days, Nationwide sought arbitration on five of these resubmitted claims. The Arbitration Panel later ruled it lacked jurisdiction over these claims, which had not been resolved during the Houdaille arbitration.
The Panel expressed disappointment over Nationwide's disregard for paragraph 3 of the Award. In response, Liberty filed a motion in Massachusetts Superior Court to confirm the Award, while Nationwide opposed it, seeking to vacate part of the Award. On October 29, 2013, the state court confirmed the Award in full, denying Nationwide's request for partial vacatur. Liberty subsequently filed a Motion to Enforce the Award for six resubmitted claims. In turn, Nationwide petitioned this court to compel arbitration under the Federal Arbitration Act, claiming Liberty refused to arbitrate disputes regarding the Access to Records Clause, leading to a stay of the proceedings pending state court resolution.
On March 6, 2014, Liberty requested clarification from the Arbitration Panel regarding the phrase "good faith effort to respond to reasonable requests" in the Award. Nationwide objected, arguing the Panel lacked jurisdiction and that the request was untimely under the Massachusetts Arbitration Act. Despite this, the Panel clarified on April 7, 2014, stating that Nationwide is obligated to respond to billing within 60 days, independent of any requests for information from Liberty.
Following this clarification, the Superior Court partially granted Liberty's Motion to Enforce concerning the six resubmitted claims, ruling that Nationwide could not delay its decisions on claims based on record access under the Treaties. However, it denied Liberty's motion in other respects and did not consider the Panel's email clarification. Nationwide then filed a Renewed Motion to Compel Arbitration in this Court, asserting unresolved issues regarding the Access to Records Clause and that the Panel had not fully addressed the parties' rights and obligations. Liberty countered that the Award resolved the entirety of their future relationship.
The Superior Court addressed two key issues: the classification of Liberty’s resubmitted billings as "future claims" under the Arbitration Award and Nationwide's right to delay coverage determinations until Liberty acted in good faith regarding records requests. The Court refrained from interpreting "future claims," emphasizing that judicial intervention in arbitration determinations is typically precluded to avoid extending awards to unresolved disputes. It upheld the Arbitration Award concerning the parties' rights to access records and payment determinations, asserting that Nationwide's obligation to make coverage decisions was not contingent on Liberty’s record disclosures. Upholding this position would undermine the Arbitration Order’s intent and effectively reset the process.
Nationwide attempted to challenge aspects of the Superior Court's ruling, but the doctrine of issue preclusion barred this effort. Federal courts must respect state court judgments, which in this case prevented relitigation of the arbitrability issue. Despite Nationwide's argument against the preclusive effect of the arbitration award, the First Circuit’s precedent indicates that the enforceability of arbitration awards is an issue for arbitrators, not courts. The Superior Court determined that the Arbitration Award had a prospective effect, establishing a timeframe for Nationwide’s coverage decisions, which could not be revisited in arbitration. Consequently, the Court granted Nationwide's motion to compel arbitration for the six resubmitted claims but denied any motion that would require relitigating the previously decided issue from the Arbitration Panel.
Nationwide seeks to vacate the Panel’s Clarification of its initial Arbitration Award, arguing that the Clarification was untimely under Massachusetts General Laws (M.G.L.) c. 251, § 9, and that the Panel lacked the authority to issue it. Liberty opposes this motion, contending it was entitled to clarification nearly six months post-award. Both parties agree that Massachusetts law governs the conditions under which an arbitration panel can clarify an award. While the Federal Arbitration Act (FAA) addresses arbitration agreements’ validity and enforceability, it does not explicitly govern an arbitrator's authority to modify an award, allowing state law to apply.
Massachusetts law stipulates that any modification of an arbitration award must be requested within twenty days of the award's delivery. Liberty argues that § 9 only refers to modifications or corrections and does not mention clarifications, asserting that the statute's time limits do not apply to non-material amendments. However, Massachusetts courts interpret § 9 to include clarifications as part of modifications. The Appeals Court has recognized that parties can request clarifications under this statute, and clarifications are not deemed nullities. Liberty’s claim lacks support in the statutory text and case law, as the distinction between clarification and modification does not affect the statute's applicability. The April 7, 2014, email from the Arbitration Panel clarified that Nationwide's payment obligations were not contingent on Liberty's compliance with a specific clause within a designated timeframe.
The original arbitration award was interpreted by the Superior Court to include a specific time framework for motions to correct, which Liberty failed to adhere to, rendering its motion untimely. The court referenced Quirk v. Data Terminal Systems, emphasizing the strict enforcement of the thirty-day deadline for judicial modification under Massachusetts law (G.L. c. 251, § 13). Consequently, Nationwide's renewed motion to compel arbitration regarding six resubmitted claims was granted, but the request to relitigate a specific arbitration conclusion was denied. Additionally, Nationwide's motion to vacate the panel’s emailed clarification was approved. The arbitration clause stipulates that any disputes must be submitted to arbitration. Notably, Nationwide did not pursue arbitration for the Lone Star claims, while other claims associated with various companies were deemed closed by Liberty, an issue not addressed by the court due to lack of briefing. A choice-of-law analysis regarding time frames for modification was unnecessary since both parties did not request the application of federal law. Liberty's request for modification was considered untimely, having been made nearly six months after the award, exceeding both Massachusetts's twenty-day limit and the FAA's three-month limit.
