Federal Court Upholds P&I Club’s Coverage Determination as Valid, Binding ADR Decision
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The U.S. District Court for the Southern District of New York has enforced a P&I Club’s internal claims appeal process as a legally binding alternative dispute resolution (“ADR”) method, rejecting allegations brought by one the Club’s Members that the procedure was “fundamentally unfair.” TransAtlantic Lines LLC v. Am. Steamship Owners Mut. Prot. & Indemn. Ass’n, Inc., 2017 WL 2334995 (S.D.N.Y. May 30, 2017). The court’s holding is a reminder that a coverage decision, rendered in connection with an ADR procedure voluntarily entered into by the parties, is not lightly set aside.
American Steamship Owners Mutual Protection and Indemnity Association (“American Steamship”) is a non-profit, mutual protection and indemnity insurance association that provides marine insurance to its Members. American Steamship’s claims handling and coverage determinations are carried out by its manager, Shipowners Claims Bureau, Inc. (“SCB”). Members can appeal a denial of coverage to American Steamship’s Board of Directors, which is composed of the association’s Members’ officers and representatives. The appeal process does not permit oral argument. The Board is required to issue written decisions within six months, which are “intended to be final and binding.” Further review of the Board’s decision may take place in federal court under an “arbitrary and capricious standard.”
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