Here is a cautionary tale for insurers with respect to the enforceability of settlement agreements.
SCA Promotions, Inc. (SCA), a Dallas-based company that offers prize indemnification insurance to athletes, has been in a continuous battle with Lance Armstrong since his doping allegations emerged in 2005. Most recently, on October 29, 2013, a Texas arbitration panel agreed to hear SCA’s attempt to recoup $7.5 million in bonus prize money, attorneys’ fees, and interest it paid to Armstrong for winning the 2004 Tour de France. This panel’s decision essentially reopens a settled matter given that, in 2006, SCA agreed both to pay the $7.5 million to Armstrong, and not attempt to challenge the award.
Due to the previous settlement agreement between SCA and Armstrong, Armstrong claimed that the arbitration panel lacked jurisdiction to hear this matter. SCA countered, and the panel agreed, that Armstrong’s January 2013 confession to the use of illicit substances and blood transfusions should allow for SCA to reverse its prior stipulation and challenge the payment. The panel voted 2-1 that it had, and would exercise, jurisdiction to determine a final award, if any, to resolve all issues between Armstrong and SCA. It is unclear how or if this arbitration decision will affect a separate lawsuit between the parties in which SCA is attempting to recoup approximately $12 million it paid to Armstrong in bonus prize money throughout his career.
Although the 2006 settlement agreement was binding, this decision demonstrates how a fully-executed settlement agreement and release still may be voided by an arbitration panel, as it is not necessarily bound by substantive rules of law. Essentially, the arbitration panel’s decision gave SCA the proverbial second bite at the apple with respect to its attempt to recoup the $7.5 million.