Parties Are Only Bound By Arbitration Decisions for Issues They Have Agreed to Arbitrate

This case involves two insurance companies, Amerisure Mutual Insurance Company (Amerisure) and Global Reinsurance Corporation of America (Global). The two companies entered into an agreement for Global to reinsure some of Amerisure’s umbrella policies. The agreement contained an arbitration clause provision and that Illinois law would govern any dispute. A dispute arose when Global sent a bill to Amerisure for $1.5 million. Global refused to pay the claim and Amerisure demanded the amounts due and other costs, damages and attorney’s fees. Global contended that the arbitration panel did not have authority to award attorney’s fees. Amerisure attempted to show bad faith and vexatious conduct by Global. Ultimately the arbitration panel awarded Amerisure the disputed amount as well as attorney’s fees. After the panel’s ruling, Global paid the disputed amount but did not pay the attorney’s fees. Amerisure then moved to confirm the arbitration award.

In response, Global alleged the arbitration panel exceeded its authority for the following reasons: the parities did not agree for the issue of attorney’s fees to be arbitrated, section 155 does not authorize the award of attorney’s fees in cases of reinsurance and that the State of Illinois does not allow the award of attorney’s fees solely based on a bad faith violation. Global filed a motion for summary judgment which was denied by the circuit court on the basis that the arbitration panel did not exceed its authority in awarding attorney’s fees. The circuit court affirmed the arbitration award and ordered Global to pay the attorney’s fees. Global appealed the circuit court’s decision to the appellate court.

Arbitration awards are reviewed differently than review of a circuit court case. Because both parties have agreed to arbitration, there is a presumption that the arbitrator acted within his authority and the court will try to uphold the arbitrator’s decision. However, because Illinois law clearly states in section 155 Illinois law that arbitrators do not have authorization to award attorneys fees, the panel exceeded its authority. Even though both parties agreed to arbitration, their agreement stated that only attorney’s fees authorized by Illinois law could be arbitrated. Since the Illinois law denies the award of attorney’s fees through arbitration, the award is void.