A federal court recently granted interest in prejudice for the period before and after an arbitration, despite the panel's previous refusal to grant interest. ExxonMobil Oil Corp. v. TIG Ins. Co. No. 16-cv-9527 (S.D.N.Y. May 18, 2020).
The case involved an arbitration between Exxon and TIG Insurance Company. The arbitration panel found that TIG owed Exxon the entire $ 25 million political limit. Exxon asked the panel to allocate more than $ 6 million for pre-judgment interest as of the date of the violation. The panel refused, stating that the arbitration agreement did not allow it to grant prejudice interest.
Exxon then asked a federal court to confirm the panel's dividend and order TIG to pay prejudice interest. In particular, Exxon asked for pre-judgment interest from (a) the day of the infringement (October 201
For interest from the date of infringement to the panel award, the court found that it could consider the matter given that the panel found that it was not authorized to do so. Although the arbitration clause in the parties' contract did not allow the panel to grant advance interest, that provision did not prevent the court from granting advance interest. Thus, the court granted advance interest from the date of the infringement until the date of the panel award and from the day of the panel award to the day of the court's decision. As the Court explained, a refusal of interest would cause parties, such as insurance companies, to erroneously withhold payments without material repercussions.
The decision shows that policyholders should not claim interest simply because an arbitration does not award it. A court may grant interest for the time both before and after the distribution of a panel. In this specific case, only the interest from the time of the panel award to the time of the court decision exceeded $ 1 million. Policyholders can use this type of interest after allotment to encourage quick payment of arbitration dividends in their favor. And where an insurer forces a confirmation process in court, policyholders should ask the court to grant advance interest up to and including the time of the court's confirmation of the arbitrator's award.