An arbitrator is the one to decide whether a dispute over a reinsurance contract should be submitted to an arbitrator or a judge, a federal appeals court said Friday, affirming a lower court ruling.
Detroit-based Alliance Health and Life Insurance Co. and Galveston, Texas-based American National Insurance Co. entered into a medical deductible reinsurance agreement, effective January 1, 2016, according to the 6th US Circuit Court of Appeals in Cincinnati’s ruling in Alliance Health and Life Insurance Co. v. American National Insurance Co .
Under the agreement, American National said it would reinsure Alliance Health for losses incurred during the term of the agreement. The agreement included a provision that disputes should be settled and that arbitrationpp may begin no later than three years after the agreement enters into force.
Alliance Health initially denied a claim submitted to it in April 2017 but reversed course in January 2018 and provided coverage retroactively from January 2014 to December 2016, the decision said.
In December 2018, Alliance Health sought nearly $1 million in reinsurance coverage for the claim. American National rejected the claim in September 2019, which was more than three years after the effective date of the agreement, stating that the employee who filed the original claim was not an eligible employee under the employer’s plan.
Alliance Health sued American National in US District Court in Detroit. American National moved to dismiss the case on the grounds that the agreement required Alliance Health to submit its claim to arbitration. Alliance Health responded that because the claim was outside the agreement’s three-year limit for commencing arbitration, it could proceed in federal court.
The district court agreed with American National and dismissed the lawsuit, and was affirmed by a three-judge panel of the Court of Appeals.
The agreement provides that no arbitration may be commenced more than three years after the agreement’s effective date, and Alliance “does not point to any other language that may indicate an intention to leave the time limit issue to an arbitrator,” the decision said.
“Accordingly, the question of whether the deadline applies is a procedural matter for an arbitrator to decide.”
Attorneys in the case did not respond to requests for comment.