The California Court of Appeal (Fourth District) recently rejected a dissatisfied litigant’s attempt to relitigate an arbitration decision that went against it to the tune of more than $18 million.
An employee of American Claims Management Inc. (ACM), a third-party administrator hired by QBE Insurance Corp. (QBE) to manage QBE’s claims, had a major case of the Mondays and apparently neglected to inform QBE about a demand for a $30,000 policy limit following a car accident. As a result of that “oops,” QBE paid $15 million to settle the claim. QBE then sued ACM for breach of contract. The parties arbitrated the dispute. An arbitration panel awarded QBE nearly $18.5 million.
QBE then petitioned a California trial court to confirm the arbitration award. ACM opposed. The court sided with QBE and confirmed the award, noting ACM appeared to be attempting to relitigate the arbitration award because it did not agree with the panel’s decision. ACM appealed. It raised a number of arguments. Specifically, ACM asserted that the arbitration panel had exceeded its powers by, for example, failing to cite California law, creating law that violated California law, awarding way too much money, and ignoring the Federal Arbitration Act. The appellate court didn’t quite see things ACM’s way, however. It noted that its review was exceptionally narrow and that it could only correct an arbitration award when the arbitrators “exceeded their powers but the award may be corrected without affecting the merits of the decision” (i.e., if the decision was “so utterly irrational that it amounts to an arbitrary remaking of the contract between the parties”). While ACM had couched its arguments in terms of exceeding power, the court concluded that ACM’s “claims amount[ed] to nothing more than assertions of legal error.”
The morals of this case: (1) if you’re a claims administrator, promptly report the claims that come in; and (2) don’t be fooled into thinking that claiming an arbitration panel “exceeded its powers” is a magic password to judicial review.
QBE Ins. Corp. v. Am. Claims Mgmt., Inc., No. D073345 (Cal. Ct. App. Feb. 4, 2019), reh’g denied (Feb. 27, 2019).