Lagstein v. Certain Underwriters at Lloyd’s, London

Dr. Zev Lagstein (plaintiff), a cardiologist, held a disability-insurance policy with Lloyd’s, London (Lloyd’s) (defendant). Lagstein developed heart disease and other ailments that prevented him from continuing to practice medicine, and Lagstein filed a claim for benefits under the disability policy, which Lloyd’s failed to pay. Lagstein sued Lloyd’s in federal court, but the case was stayed while the parties submitted the dispute to arbitration, as mandated by Lagstein’s policy. The majority of the arbitration panel found in favor of Lagstein and awarded him $2.4 million in compensatory damages. In its order, the arbitration panel also determined that Lagstein should be awarded punitive damages, but that the amount of punitive damages would be determined by a separate hearing. A few months later, the arbitration panel held the hearing on punitive damages and awarded Lagstein $4 million in punitive damages. Lloyd’s filed a motion to vacate the arbitral awards on several grounds. In particular, Lloyd’s argued that the arbitration panel lacked jurisdiction to enter the punitive-damages award because the applicable rules required that a decision be issued within 30 days of the hearing, and the panel did not issue the punitive-damages award for months after its initial decision. The district court vacated the arbitration panel’s awards, and Lagstein appealed.