Arbitration Awards Need Abuse to Be Overturned: Arbitrators have Substantial Discretion to Determine the Scope of Their Contractual Authority to Fashion Remedies.

Author:Zalma, Barry
Position:[ON MY RADAR]

* Arbitration is controlled by strong public policies favoring arbitration as a speedy and relatively inexpensive means of dispute resolution. For that reason arbitration awards are almost never overturned unless the aggrieved party can prove the arbitrators exceeded their powers, acted as a result of conflict of interest, or acted wrongfully.

In QBE Insurance Corporation v. American Claims Management, Inc., D073345, Court of Appeal, Fourth Appellate District Division One State of California (February 4, 2019) Appellant American Claims Management, Inc. (ACM), a third party claims service administrator, entered into a contract to handle insurance claims on behalf of respondent QBE Insurance Corporation (QBE). ACM appeals a judgment entered after the superior court confirmed an arbitration award in QBE's favor. The arbitration panel (the Panel) 1 concluded that ACM violated the parties' contract in handling a claim by a QBE auto insurance policy holder, Galdino Cortes, who was involved in a vehicular accident that injured three members of the Cardona family. The Panel awarded QBE total damages of $18,450,855.73, which included interest, attorney fees and costs.

ACM contends the Panel exceeded its powers because it:

* "ignored California law" as shown by its failing to cite "a single California case or statute in discussing whether ACM breached the contract or must indemnify QBE";

* "created new California law in violation of California statutes and public policy;

* held ACM liable for the entire $15 million settlement although, at most, ACM is assertedly only liable to indemnify QBE for the $1,250,000 that QBE paid to Cortes under the settlement agreement, and not the $13,750,00 settlement with the Cardonas

* manifestly disregarded the law under the Federal Arbitration Act (FAA); and

* "miscalculated amounts owed to QBE."

ACM specifically contends the Panel improperly included in its award "damages relating to attorneys' fees in the Cardona[ ] litigation"; "fees and interest, for obligations incurred before the Panel determined the duty to indemnify arose"; and attorney fees in the arbitration.


The parties stipulated to the following facts during arbitration: In February 2011, Cortes was involved in a traffic collision with the Cardonas. Cortes's insurance policy had a $30,000 liability limit per accident. That month, the Cardonas mailed a policy limits demand to ACM, giving it 15 days to respond. After a late attempt to...

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