## Facts

- ExxonMobil Oil Corporation (Exxon) purchased an excess liability insurance policy from TIG Insurance Company (TIG) as part of a multi-layer program, with TIG responsible for $25 million in coverage at its layer.
- Exxon faced multiple lawsuits seeking damages for alleged environmental contamination linked to a gasoline additive Exxon previously used; at least some claims involved leaks from Exxon’s underground storage tanks.
- A coverage dispute arose over whether the TIG excess policy applied to those claims, turning on the meaning of the term “end user” in the policy.
- The policy contained a New York choice-of-law provision and a nonstandard “even-handed” construction directive stating that ambiguities should be resolved without presumptions favoring either side and without regard to who drafted the language.
- The dispute proceeded to arbitration in New York under the policy’s dispute-resolution provisions.
- In arbitration, Exxon and TIG offered competing interpretations of “end user.” The arbitration panel rejected both proposed meanings and adopted its own construction.
- The panel stated it was guided by an interpretive method described as using “common speech” and the “reasonable expectation and purpose of the ordinary businessman,” which it characterized as used by New York courts in insurance cases.
- The panel’s interpretation favored Exxon, and it issued a final award for Exxon. Exxon then moved in federal court to confirm the award and obtain a judgment that included prejudgment interest; TIG cross-moved to vacate, arguing the panel manifestly disregarded the law by using an insurer-against-the-drafter method contrary to the policy’s even-handed clause.

## Issues

1. Did the arbitration panel manifestly disregard the law by interpreting “end user” using a New York insurance-contract interpretive method that TIG argued conflicted with the policy’s even-handed construction clause?
2. Under the Federal Arbitration Act, was there any valid basis to vacate the award, or was confirmation required because the award was at least arguably based on the contract and governing law?
3. If the award was confirmed, was Exxon entitled to prejudgment interest, and from what point should interest run?

## Decision

- The court granted Exxon’s motion to lift the stay and confirm the arbitration award.
- The court denied TIG’s cross-motion to vacate, finding TIG failed to meet the demanding standard for vacatur based on manifest disregard of the law.
- The court directed entry of judgment for Exxon consistent with the arbitral award.
- The court awarded prejudgment interest as part of the judgment confirming the award.

## Legal Principles

- Judicial review of arbitration awards under the Federal Arbitration Act is highly limited; a court must confirm an award unless a statutory ground for vacatur is shown.
- “Manifest disregard of the law” requires more than legal error: the governing rule must be clear, the arbitrators must know it, and they must intentionally refuse to apply it.
- An arbitrator’s interpretation of a contract term generally cannot be re-litigated in court; an award will be upheld if it has at least a colorable basis in the agreement and applicable law.
- Arbitrators do not exceed their authority merely by rejecting both parties’ proposed readings and adopting a different reasonable construction of disputed contract language.
- Under New York insurance-contract interpretation, reliance on ordinary meaning, common usage, and the expectations of a reasonable businessperson is a recognized tool and does not, without more, amount to construing ambiguities against the insurer.
- A contractual direction to construe a policy “even-handedly” does not by itself establish that the arbitrators violated controlling law where the panel applied New York interpretive tools and did not apply a rule that ambiguities must be resolved against the insurer.
- A court confirming an arbitration award may include prejudgment interest where authorized by applicable law to compensate for the time value of money owed.

## Conclusion

The Southern District of New York confirmed an arbitration award interpreting the TIG excess policy term “end user” in Exxon’s favor and refused to vacate the award because TIG did not show the panel knowingly ignored clearly applicable law; the court also entered judgment confirming the award and granted prejudgment interest.


ExxonMobil Oil Corporation v. TIG Insurance Company, 2020 U.S. Dist. LEXIS 87407 (2020)