Patton Boggs Reinsurance Newsletter - June 2013: New York Court Holds Arbitrators Must Determine Limitations Issue

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ROM Reinsurance Mgt. Co. v. Continental Ins. Co., No. 654480/12 (N.Y. Sup. Ct. Mar. 22, 2013).

A New York motion court was presented with a petition to stay arbitration, based on the statute of limitations, of certain claims under reinsurance contracts.  The cedent demanded arbitration for reinsurance recoverables under contracts containing an arbitration clause with a New York governing law clause.  The reinsurers resisted and brought this petition to stay the arbitration because New York’s six-year statute of limitations for breach of contract allegedly applied to bar the claims.

The cedent moved to compel arbitration arguing that the Federal Arbitration Act (“FAA”) governed the dispute and that the contracts did not state that New York law applied to the enforcement of the contracts.  The question was whether the arbitrators or the court would decide the statute of limitations question.

In finding for the cedent, the court held that the statute of limitations issue was for the arbitrators to determine. The court noted that under New York law, timeliness and arbitrability were for the court to decide while under the FAA, timeliness is generally left to the arbitrators.  A contract, stated the court, may be governed by the FAA yet subject to the New York rule if the agreement expressly provides.  If the contract states that New York law shall govern both the agreement and its enforcement, gateway matters must be decided under New York law by the court.  Without that express language, issues like timeliness are for the arbitrators to decide.

Here, the court found there was no issue that the FAA applied.  The court reviewed the contracts and found that there was no express language regarding enforcement.  The arbitration clause merely stated that disputes shall be governed by New York law, but it did not express an intent to have New York law govern enforcement.  Accordingly, the petition was dismissed.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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