Court of Chancery Vacates Arbitration Panel's Award
Travelers Ins. Co. v. Nationwide Mut. Co., C.A. No. 20418, 2005 WL 2896713 (Del. Ch. Oct. 25, 2005).
Plaintiff, insurer of motorist, sued Defendant, insurer of tortfeasor, to enforce arbitration award. Defendant moved for summary judgment.
As a result of a car accident caused by Defendant's insured, Plaintiff paid its insured $6,219.59 in PIP/No Fault benefits and then sought to recover that money from Defendant. Those claims were submitted to arbitration. In the meantime, Plaintiff's insured settled her claims with Defendant for $50,000, which was the limit of Defendant's liability under its policy. Although Defendant notified Plaintiff and the arbitration panel of the settlement, the arbitration panel awarded Plaintiff $6,219.59 in satisfaction of its subrogation claim. Plaintiff instituted this action to enforce the arbitration award. Defendant sought summary judgment, arguing that the arbitration panel erred in granting relief to Plaintiff.
The Court held that this was one of the rare cases where an arbitration award should be disregarded because the arbitrators exhibited "manifest disregard" of the law. Under Delaware law, Plaintiff's rights were limited to the maximum amount of the tortfeasor's liability insurance coverage available for the injured party. The arbitration panel disregarded the law when it found for Plaintiff on its subrogation claim.