In a decision with implications for insurance disputes, a Federal Court in New York City abdicated its decision of whether it has subject-matter jurisdiction in a case, to an arbitrator. See CRT Capital Grp. v. SLS Capital, S.A., 2014 WL 6879099 (S.D.N.Y. December 5, 2014).
The case involved a contract between two groups of investors. Their contract contained a fairly standard arbitration clause in use in such contracts as well as in other contracts such as cable television subscriptions, consumer purchases, and commodities trading. The arbitration clause provided that only an arbitrator is authorized to determine whether a dispute is subject to arbitration in the first instance.
The determination whether a case or controversy is within a Court's subject-matter jurisdiction has until now been reserved to the Court to determine. In this case, however, a Federal Court abdicated its subject-matter jurisdiction to an arbitrator because the parties' agreement provides that only an arbitrator can determine whether a dispute falls within the terms of a contract to arbitrate disputes.
I am not aware of reported cases in which Courts have faced this contention in the context of insurance. There may be some cases but I am not aware of them. If you know of reported insurance cases in which any party raised arbitration as an obstacle to prevent Court proceedings over the insurance dispute, I would appreciate your contacting me about them and thank you in advance.
Regardless of whether you or I welcome or deplore this development, it seems to be only a matter of time before a party defends against a lawsuit over insurance coverage or a case of alleged insurance bad faith on the ground that the parties in that case previously agreed to arbitrate the matter instead of pursuing rights and remedies in a Courtroom.
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