When an arbitration award is ambiguous or fails to address a contingency that later arises, arbitrators retain the legal power to clarify or alter that award. This rule reflects a formal exception to the doctrine of functus officio, which would otherwise prohibit an arbitrator from exercising any authority after he or she has adjudicated the issues presented. ABA Section of Litigation leaders say this exception is in line with current trends and will further arbitration’s goals of settling disputes efficiently and avoiding expensive and protracted litigation.
Arbitrators Permitted to Clarify Ambiguity in Award
In General Re Life Corporation v. Lincoln National Life Insurance Company, the U.S. Court of Appeals for the Second Circuit considered an appeal of a trial court’s confirmation of an arbitration award which had been modified by the arbitrators after it was originally issued. The underlying arbitration involved a dispute over the calculation and payment of insurance premiums. The arbitration panel ordered that General Re was entitled to increased premiums, but that Lincoln National was entitled to “recapture” life insurance policies issued by General Re rather than pay those additional premiums. Lincoln National exercised this right, but General Re refused to repay certain categories of premiums to Lincoln National.
Premium Content For:
- Litigation Section