Court Awards Prejudgment Interest For Time Before And After Arbitration Award
A federal court recently added prejudgment interest for the period before and after an arbitration award despite the panel’s prior refusal to award interest. ExxonMobil Oil Corp. v. TIG Ins. Co., No. 16-cv-9527 (S.D.N.Y. May 18, 2020).
The case involved an arbitration between Exxon and TIG Insurance Company. The arbitration panel found that TIG owed Exxon the full $25 million policy limit. Exxon asked the panel to award more than $6 million of prejudgment interest running from the date of breach. The panel refused, finding that the arbitration agreement did not allow it to award prejudgment interest.
Exxon then asked a federal court to confirm the panel’s award and to order TIG to pay prejudgment interest. In particular, Exxon asked for prejudgment interest from (a) the date of breach (October 2016) until the date of the arbitration panel’s award (August 2019) and (b) the date of the arbitration panel’s award (August 2019) until the date of the court’s order confirming the panel’s award (May 2020). The Court granted that request.
For interest from the date of breach until the panel’s award, the court found it could consider the issue given that the panel found it was without jurisdiction to do so. While the arbitration provision in the parties’ contract did not permit the panel to award prejudgment interest, that provision did not bar the court from awarding prejudgment interest. Thus, the Court awarded prejudgment interest from the date of breach until the date of the panel award and from the date of the panel award until the date of the court’s order. As the court explained, to decline the imposition of interest would embolden parties, like insurers, to wrongfully withhold payment with no material repercussion.
The decision shows that policyholders should not abandon claims for interest simply because an arbitration panel does not make the award. A court can award interest for the time both before and after a panel’s award. In this particular case, just the interest from the time of the panel’s award to the time of the court’s decision exceeded $1 million. Policyholders can use this type of post-award interest to encourage prompt payment of arbitration awards in their favor. And where an insurer forces a confirmation proceeding in court, policyholders should ask the court to award prejudgment interest through the time of the court’s confirmation of the arbitrators’ award.