The Fourth Circuit Court of Appeals determined that the procedure that a lower court used to resolve ambiguity resulting from two related arbitration awards was ineffective due to limitations the court imposed on response format and because not all of the arbitration panel responded to the court's inquiry.

In Burlington Ins. Co. v. Trygg-Hansa Ins. Co. AB, No. 06-2082, 2008 WL 154465 (4th Cir. Jan. 17, 2008), Burlington commenced arbitration with Trygg to resolve disputes arising out of reinsurance contracts between the parties. The arbitration panel awarded Burlington $4.8 million (Award I).

Burlington then brought various state law claims against Trygg. These claims were subject to arbitration agreements, and a second arbitration panel was convened to hear the claims. The panel awarded Burlington $2 million (Award II). In the award memorandum, the panel referred to Award I.

The lower court reviewed Award II and determined that it was ambiguous as to whether the panel intended to supplement the amount that Trygg owed under Award I, or if Award II should offset Award I. The lower court attempted to clarify the ambiguity by submitting a single question to the arbitrators, and limiting the response to: yes or no.

After receiving responses from only two of the arbitrators, the lower court determined that Award II incorporated Award I, so the total amount awarded to Burlington was $2 million. On appeal, Burlington argued that the lower court had failed to resolve the ambiguity.

The Court determined that the lower court properly determined that the award should be remanded to the arbitrators for further clarification. However, the Court noted that the procedure employed by the lower court to clarify the ambiguity was unsuccessful.

The lower court chose to submit only one question to the arbitrations, and limited the response to a "yes" or "no" answer. Further, only two of the three arbitrators submitted responses to the court's question.

The Court noted that without any further inquiry, it was not possible to resolve the ambiguity of the awards from a one-word response, and from only two of the panel members.

The Court determined that Award II was still ambiguous. The Court vacated the lower court's decision and remanded the issue.