Hennessy Indus., Inc. v. Nat'l Union Fire Ins. Co., No. 14-1277 (7th Cir. 2014)Annotate this Case
Hennessy, a car parts manufacturer, beset by asbestos-related personal injury claims, sought coverage by National Union. The companies entered into a cost sharing agreement in 2008. As claims occurred, Hennessy asked National Union to indemnify its settlement and defense costs. To resolve their differences about what was owed, Hennessy demanded arbitration under the agreement, which instructs arbitrators to apply Illinois law. Hennessy filed suit under the Illinois Insurance Code 215 ILCS 5/155(1), which provides that, in cases involving vexatious and unreasonable delay, the court may award reasonable attorney fees, other costs, plus an additional amount. Hennessy claimed that National Union’s delays in providing coverage were vexatious and unreasonable. The district judge declined to dismiss, acknowledging a provision that “the arbitrators shall not be empowered or have jurisdiction to award punitive damages, fines or penalties,” but expressing a belief that Hennessy’s claim arose under statutory law rather than under the cost-sharing agreement. National Union appealed under 9 U.S.C. 16(a)(1)(A), (B), the Federal Arbitration Act. The Seventh Circuit reversed. Hennessy waived any right to ask the arbitrator to award punitive damages, fines, or penalties for an allegedly unreasonable delay. Having submitted a dispute to arbitration that explicitly excludes a particular remedy, a party cannot sue in court for that remedy.