When an arbitration agreement is ambiguous as to the proper form of proceedings, that matter is reserved for determination by the arbitrator instead of a court, according to a federal district court in Michigan.

In Dorinco Reinsurance Co. v. Ace American Ins. Co., No. 07-12622, 2008 WL 192270 (E.D. Mich. Jan. 23, 2008), Dorinco entered into multiple contracts for reinsurance with sixteen different companies. After Dorinco's client suffered losses during Hurricanes Rita and Katrina and the parties disagreed on the value of the losses, Dorinco sought to compel arbitration of the dispute.

Dorinco moved to compel arbitration of the dispute under an arbitration agreement contained in each contract executed with the reinsurers. Dorinco maintained that the arbitration agreement contemplated resolution of the dispute for each incident by a single panel. Alternatively, Dorinco argued that, should the Court find the agreements ambiguous as to the proper form for arbitration, the Court should defer any determination of the proper form to a single panel for each incident.

The reinsurers maintained that the plain language of the arbitration agreement mandated the use of a separate panel of arbitrators for each reinsurer involved in the dispute.

The Court stated that courts are allowed to interpret an arbitration agreement to determine its validity or applicability under Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003). However, courts are also required to reserve questions regarding the form of arbitration to the arbitrator if the court finds the agreement's form provisions ambiguous.

After reviewing the individual reinsurance contracts, the Court determined that the agreement was ambiguous as to the form of the arbitral proceedings. According to the Court, the text of the provision did not clearly indicate whether it addressed the reinsurers individually or as a group. The Court noted that the agreement referred to the reinsurers in the singular in some provisions, and in the plural in others. Therefore, the Court held that the form of arbitration should properly be determined by a single arbitration panel for each incident.

The Court rejected the reinsurers' request that a panel be appointed to determine the form of arbitration for each reinsurer involved, noting that separate panels would likely be less efficient and might actually fail to preserve the arbitrator's ability to actually decide the question of proper form if those multiple panels came to varying conclusions.