Locke Lord QuickStudy: ARIAS Certified Arbitrators: One Size Does Not Fit All

July 24, 2017

The Board of Directors for the AIDA Reinsurance and Insurance Arbitration Society (“ARIAS”) has been considering increasing ARIAS’ reach by expanding membership to brokers and policyholders.  This is only in the exploratory stages, and by no means an indication that it will come to fruition.  A recent decision from the Southern District of New York raises an interesting issue in this regard.

A United States District Judge recently exercised her authority to appoint an umpire after party appointed arbitrators failed to select one.  

In National Union v. Beelman Truck Co, et al., No. 17-cv-02946, National Union, relying on the Federal Arbitration Act (“FAA”) and the arbitration provision in the agreement between the parties, petitioned the Court to select an umpire because the parties’ arbitrators did not select a neutral umpire within 30 days of their appointment, as required by the agreement.  The Respondents asked the Court to deny National Union’s petition and order the party arbitrators to select one of the candidates the parties had presented to them.  In the alternative, the Respondents requested that the Court select one of the candidates submitted by the Respondents. 

Finding that it had the power to select an umpire pursuant to the FAA and the agreement, the Court turned to the agreement’s requirement that the arbitrators (including the umpire) must have insurance, reinsurance or risk management experience in the trucking or similar industry.  Faced with eight potential candidates (five presented by National Union; three presented by the Respondents), the Court selected an arbitrator proposed by National Union, despite the Respondents’ concern that all of National Union’s candidates were certified by ARIAS.  The Respondents were concerned that “the process for becoming ARIAS-certified is skewed towards those with insurance company experience and, therefore, ARIAS-certified arbitrators are more likely to be partial to the insurance company.”  The Respondents argued that the agreement did not require ARIAS certification.  The Court agreed, but implicitly, and correctly, refused to disqualify a candidate merely because of his or her ARIAS certification.   

Unfortunately for them, the Respondents failed to put forth candidates with any arbitration experience. In contrast, all of the candidates submitted by National Union had a wealth of experience as arbitrators and umpires, and the one the Court selected had been an umpire in twenty-four arbitrations, in addition to his experience both in life insurance and property casualty insurance companies.  Arbitrations between entities involved in the insurance industry and entities with no insurance industry involvement are unlikely to agree on an ARIAS slate, as presently constituted.  If ARIAS decides to expand its membership, it would need to consider expanding its certifications, as, unlike a pair of socks, one size does not fit all.