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Court Appoints a Neutral Arbitrator based on Interpretation of Arbitration Provision that Original Umpire Selected by the Parties was Disqualified

By Francis G. X. Pileggi, Esq.

Firemen's Insurance Company of Washington, D.C. v. Birch Pointe Condominium Association, Inc., No. 4313-VCP (Del. Ch., May 29, 2009), read opinion here

This short letter decision involves interpretation of an arbitration provision in an insurance policy.

Procedural Background

This case was originally filed in the Superior Court of Delaware, which, sua sponte, determined that it did not have jurisdiction and therefore the case was transferred to the Chancery Court pursuant to Section 1902 of Title 10 of the Delaware Code. The basis for the transfer was that the Superior Court determined that the Court of Chancery was vested with exclusive jurisdiction to appoint an arbitrator when the method of appointment set forth in an agreement to arbitrate fails for any reason. See footnote 4 (citing 10 Del. C. Section 5702 and 5704 of the Delaware Uniform Arbitration Act). Moreover, the court determined that the inherent equitable jurisdiction of the Chancery Court includes the power to enforce arbitration agreements (case citations omitted). The court made its ruling based on the standard under Rule 12(c) for a Motion for Judgment on the Pleadings.

Reasoning and Conclusion

The sum and substance of this short letter decision is that an arbitration clause involved in this insurance coverage dispute provided that each party was required to pick an impartial appraiser and those two appraisers would pick a neutral umpire. The issue arose because one of the parties picked a partial appraiser and that partial appraiser was one of the two who picked a neutral umpire. The issue was whether the umpire that was picked by the partial appraiser was disqualified because the partial appraiser, who was later replaced with an impartial appraiser, was disqualified. The court determined that the partial appraiser was chosen in violation of the arbitration provision and was therefore not authorized to join in the selection of a neutral umpire. The bottom line is that the court chose a neutral umpire on its own and thus granted judgment on the pleadings for the plaintiff.

 

Full post as published by Delaware Corporate and Commercial Litigation Blog on June 09, 2009 (boomark / email).