Insurance-Arbitration Award Enforcement

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7^th Circuit Court of Appeals

Case Name: American Zurich Insurance Company v. Sun Holdings, Inc.

Case No.: 23-3134

Officials: Easterbrook, Kirsch, and Lee, Circuit Judges.

Focus: Insurance-Arbitration Award Enforcement

Sun Holdings acquired a workers’ compensation policy from American Zurich Insurance, which stipulated Sun’s responsibility to cover the initial $250,000 of each claim. Despite American Zurich fulfilling its obligations, Sun failed to reimburse as agreed. Instead, Sun disregarded the bills without providing any rationale. In response, American Zurich invoked the policy’s dispute-resolution clause, prompting arbitration in Illinois under New York law and the American Arbitration Association’s rules.

Throughout the arbitration, Sun presented feeble excuses, which were promptly dismissed by the arbitrators. Consequently, the arbitrators ruled in favor of American Zurich, ordering Sun to pay the claimed amount (approximately $1.1 million plus 9% interest from the due dates of each bill) and levying almost $175,000 in attorneys’ fees as a penalty for Sun’s frivolous defense.

American Zurich sought enforcement of the arbitration award from the Northern District of Illinois. Sun contested the arbitrators’ authority to compel payment of the insurer’s legal fees, citing specific clauses in the contract. However, the district court ruled against Sun, mandating full payment of the award.

On appeal, the Seventh Circuit determined that the arbitrators’ interpretation of the contract regarding legal fees was within their purview. It emphasized that the Federal Arbitration Act prohibits attempts to challenge arbitrators’ findings. Consequently, the court directed Sun to explain why sanctions should not be imposed for its frivolous appeal.

Affirmed.

Decided 06/03/24

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