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Hamilton Life Insurance Co. v. Republic National Life Insurance Co.

decided: March 12, 1969.

HAMILTON LIFE INSURANCE COMPANY OF NEW YORK, PETITIONER-APPELLEE,
v.
REPUBLIC NATIONAL LIFE INSURANCE COMPANY, RESPONDENT-APPELLANT



Medina, Smith and Hays, Circuit Judges.

Author: Smith

J. JOSEPH SMITH, Circuit Judge:

This is an appeal from a judgment of the United States District Court for the Southern District of New York, William B. Herlands, Judge, 291 F. Supp. 225 (S.D.N.Y.1968), granting motion of appellee Hamilton Life Insurance Company of New York to compel arbitration pursuant to 9 U.S.C. ยง 4.*fn1 We find no error and affirm the judgment.

Republic contends that it was entitled to a trial by jury on the issue of the existence of a written contract to arbitrate, that the terms of the agreement giving broad powers to the arbitrators denied it due process of law, that the agreement is invalid under the McCarran Act, and that there was no jurisdiction over it obtained in the action. Judge Herlands, in a characteristically careful and well reasoned opinion, rejected these contentions, and we agree.

On September 21, 1965 Hamilton and Republic entered into a written agreement of reinsurance, which provided that Republic would reinsure a certain percentage of the risks on group life insurance policies written by Hamilton covering civil service employees in the New York City area. The reinsurance agreement contains the following broad arbitration clause:

1. All disputes and differences between the two contracting parties upon which an amicable understanding cannot be reached are to be decided by arbitration and the arbitrators shall place a liberal construction upon this agreement free from legal technicalities, for the purpose of carrying out its evident intent.

2. The court of arbitrators, which is to be held in the city where the home office of CEDING COMPANY [Hamilton] is domiciled, shall consist of three arbitrators. * * *

Disputes having arisen between the parties, on July 27, 1967 Hamilton served on Republic a Demand for Arbitration which recited that by virtue of the reinsurance agreement Republic was obligated to pay Hamilton the sum of $278,023.41, representing claims paid by Hamilton and reinsured by Republic. Republic refused to proceed to arbitration, and instead instituted a number of court proceedings in the Northern District of Texas and the District of Arizona to obtain judicial relief. Hamilton was at the time in financial difficulty and is under supervision by the New York State Insurance Department.

On December 11, 1967, Hamilton commenced the present action in the District Court to compel arbitration.

I.

Republic claims that the District Court erred in not requiring a jury trial in order to determine, as a preliminary fact, whether a written contract was made providing for arbitration of the disputes which Hamilton seeks to arbitrate. Specifically, Republic maintains that the contract is really a three-party parol contract, with Financial Security Life Insurance Company the third party, and that as such the contract must have a three-party arbitration clause to permit arbitration of disputes involving the ultimate liability of the three parties.

Section 2, 9 U.S.C. provides as follows:

A written provision in any * * * contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof * * * shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

Although a frivolous or patently baseless claim should not be ordered to arbitration, a court's function in an action to compel arbitration is limited to ascertaining whether the party seeking arbitration is making a claim which on its face is governed by the contract. Procter & Gamble Independent Union of Port Ivory, N. Y. v. ...


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