Federal Common Law Should be Used in Defining ‘Arbitration Clause,’ 2nd Cir. Rules

NEW YORK — A federal district court properly applied federal common law, rather than state law, in determining whether a third-physician clause in a disability policy is an “arbitration clause," the 2nd Circuit U.S. Court of Appeals has ruled in an issue of first impression.

On Jan. 23, the appellate court concluded the lower court had subject matter jurisdiction over the coverage dispute.

Imad Bakoss filed a declaratory judgment action in New York state court against certain Lloyd’s of London underwriters, seeking coverage under a permanent total disability insurance certificate. The underwriters removed the action to the U.S. District Court …