Great Expectations/Manifest Destiny: The Doctrines of Reasonable Expectations and Manifest Disregard in RWI Policy Claims

When pursuing a representations and warranties insurance (“RWI”) claim, an insured will sometimes be confronted with a contradictory policy provision or rule of law, or both. In such a situation, consideration of two doctrines may be of help: reasonable expectations of the insured, with respect to insurance law, and manifest disregard of the law, with respect to vacating an arbitration decision.^[1]

The doctrine of reasonable expectations of the insured (“REI Doctrine”) is relevant to insurance policies generally, typically for liability insurance. When applicable, the doctrine looks to the objective reasonable expectations of an insured confronted with a policy provision that would otherwise block or cause a forfeiture of coverage. Case law regarding the doctrine is often predicated on the presence of certain factors that give rise to the insurer’s having greater bargaining power than the insured with respect to the terms and conditions of the policy. While the doctrine is usually applicable only in the case of an ambiguous policy provision, in some cases in some jurisdictions it has been held applicable even in the face of an unambiguous policy provision that adversely affects coverage availability.

The doctrine of manifest disregard of the law (“MDL Doctrine”) is relevant to arbitrations generally. The doctrine directs courts to give extreme deference to the decision of an arbitrator in evaluating evidence, interpreting an insurance policy or other contract, or otherwise applying the law relevant to the matter being arbitrated. The doctrine establishes an extremely high barrier to an arbitration party that is seeking judicial vacatur.

While there appears to be no case law in the U.S. that applies either doctrine to a claim under an RWI policy, each doctrine may present strategic or tactical advantages to an RWI insured, particularly one confronted with an otherwise contradictory policy provision or rule of law.

Reasonable Expectations of the Insured

In March 1970, Professor Robert E. Keeton of Harvard Law School published the first part of a two-installment article in the Harvard Law Review titled “Insurance Law Rights at Variance With Policy Provisions.”^[2] In examining the landscape of published insurance law cases, Keeton was able to discern two primary principles that he believed explained favorable-to-policyholder court decisions that were seemingly contradicted by policy provisions: the principle of unconscionable advantage of the insurer and the principle of reasonable expectations of the insured.^[3] The article proposed a formal recognition of the latter principle, which over time developed into the REI Doctrine.^[4]

Subsequent to Keeton’s article, courts throughout the U.S. considered and many adopted some form of the REI Doctrine. Although there have been variations on each, two primary versions of the REI Doctrine developed: one in which courts used the REI Doctrine only in the interpretation of ambiguous insurance policy provisions (“Qualified Version”), and one in which courts used the REI Doctrine to overcome unambiguous insurance policy provisions otherwise contrary to the position being asserted by the insured (“Unqualified Version”).

Over time, enthusiasm for the REI Doctrine has waxed, with courts in a number (but fewer than a majority) of states adopting the Unqualified Version, and then waned, with many of those same courts retrenching to the Qualified Version and a few renouncing the REI Doctrine altogether. Throughout that period of wax and wane, a significant number of law professors, insurance attorneys, and other commentators weighed in on many aspects of the REI Doctrine.^[5]

Courts often take into account the following factors (“REI Factors”) in determining whether or not the REI Doctrine (or, in addition or as an alternative, the contra proferentem interpretation principle, which results in ambiguities in an insurance policy generally being construed against the insurer and in favor of the insured)^[6] might apply to an insurance claim dispute:

• Whether the insurance policy in question could be considered to be a contract of adhesion, including whether:
  • the policy is a printed form
  • the insured is not encouraged or even permitted to negotiate changes to policy provisions
  • the insured did not make any changes to the policy provisions
  • the policy was presented to the insured on a “take it or leave it” basis
  • the insured received the policy after it went into effect
• Whether the insurer or the insured drafted the policy or at least the policy provision in question
• Whether the insurer has greater sophistication or bargaining power than the insured^[7]

Under Delaware law, courts have applied a hybrid version of the REI Doctrine. The seminal case in Delaware with respect to the REI Doctrine is the 1974 Delaware Supreme Court case of State Farm v. Johnson,^[8] in which the court determined that “an insurance contract should be read to accord with the reasonable expectations of the [insured] so far as its language will permit.”^[9] However, in the 1982 Delaware Supreme Court case of Hallowell v. State Farm, the court limited the effect of Johnson by keying in on the phrase “so far as its language will permit” to hold that the REI Doctrine “is applicable in Delaware to a policy of insurance only if the terms thereof are ambiguous or conflicting, or if the policy contains a hidden trap or pitfall, or if the fine print purports to take away what is written in large print.”^[10]

Under New York law, the REI Doctrine is effectively intertwined with the contract interpretation principle of contra proferentem. “For the most part, the reasonable expectations analysis is employed to determine if a contract is ambiguous in the first instance. Some courts also employ the doctrine to interpret an ambiguous provision.”^[11]

As of 2024, it appears that the courts in only two U.S. states continue to apply the Unqualified Version of the REI Doctrine: Alaska and Hawaii. Moreover, a number of states that had adopted the Qualified Version of the REI Doctrine have retrenched by finding the Qualified Version to be no different effectively than the contra proferentem interpretation principle.^[12] Notwithstanding that retrenchment, the REI Doctrine may still be of value to an insured in an RWI policy claim dispute, as discussed below in the section titled “The REI Doctrine, the MDL Doctrine, and RWI Claims.”

Manifest Disregard of the Law

In December 1953, the U.S. Supreme Court decided the case of Wilko v. Swan.^[13] In connection with the Wilko Court’s holding that an agreement between a securities buyer and a securities broker to arbitrate future controversies constituted an invalid waiver of the buyer’s right to litigate under the Securities Act, the Court noted that one of the deficiencies of arbitration as opposed to litigation was that there was only an extremely limited right to “appeal” an arbitration decision, in the form of vacatur under the Federal Arbitration Act (f.k.a. “United States Arbitration Act”; “FAA”). Among other things, the Court noted that “the interpretations of the law by the arbitrators in contrast to manifest disregard are not subject, in the federal courts, to judicial review for error in interpretation.”^[14] Subsequent to the Wilko decision, U.S. courts keyed in on that emphasized phrase in Wilko as support of a grounds for vacatur of an arbitration decision based on the arbitrator’s manifest disregard of the law.^[15]

Among other things, courts found that manifest disregard of the law by the arbitrator constituted a common-law ground for vacatur, independent of and additional to the four statutory grounds for vacatur set forth in the FAA.^[16] Those four statutory grounds are as follows:

(1) where the award was procured by corruption, fraud, or undue means;

(2) where there was evident partiality or corruption in the arbitrators, or either of them;

(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or

(4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.^[17]

However, in the March 2008 U.S. Supreme Court case of Hall Street Associates, L.L.C. v. Mattel, Inc.,^[18] the Court determined that the only grounds for vacatur available under the FAA were those four statutory grounds. Nonetheless, while the Hall Street Court rejected manifest disregard of the law as an independent, common-law ground for vacatur, it left open the door for assertion of manifest disregard of the law either as a gloss on the four statutory grounds taken collectively or as shorthand for the statutory grounds “authorizing vacatur when the arbitrators were ‘guilty of misconduct’ or ‘exceeded their powers.’”^[19]

A litigant seeking vacatur by reason of the arbitrator’s manifest disregard of the law faces an extremely high barrier to success.^[20] In the U.S. Court of Appeals for the Second Circuit, for example, such a litigant “bears a heavy burden, as awards are vacated on grounds of manifest disregard only in those exceedingly rare instances where some egregious impropriety on the part of the arbitrator is apparent.”^[21] The court “will uphold an arbitration award under this standard so long as the arbitrator has provided even a barely colorable justification for his or her interpretation of the contract,” and even if the court disagrees with the arbitrator’s decision.^[22] “Vacatur is only warranted . . . when an arbitrator strays from interpretation and application of the agreement and effectively dispenses his own brand of industrial justice.”^[23] Based on this high and exacting standard, some courts have determined that an arbitrator’s interpretation of a contract will be given full deference and that manifest disregard of evidence is not sufficient to constitute manifest disregard of the law.^[24]

The test that courts in the Second Circuit, and in jurisdictions following the Second Circuit’s guidance, apply has three prongs:

1. “consider whether the law that was allegedly ignored was clear, and [was] in fact explicitly applicable to the matter before the arbitrators” (sometimes referred to as the “objective prong” or “objective component”);
2. “find that the law was in fact improperly applied, leading to an erroneous outcome” (i.e., if the outcome would have been the same from a proper application of the law, then this prong will not have been satisfied); and
3. “the arbitrator must have known of [the] existence [of the law], and its applicability to the problem before him,” with the court “infer[ring] knowledge and intentionality on the part of the arbitrator only if [it] find[s] an error that is so obvious that it would be instantly perceived as such by the average person qualified to serve as an arbitrator” (sometimes referred to as the “subjective prong” or “subjective component”).^[25]

Under Delaware law, courts applying the MDL Doctrine utilize a three-prong test similar to the test utilized in the Second Circuit: “that the arbitrator (1) knew of the relevant legal principle, (2) appreciated that this principle controlled the outcome of the disputed issue, and (3) nonetheless willfully flouted the governing law by refusing to apply it.”^[26]

The absence of a written reasoned decision of the arbitrator makes vacatur because of manifest disregard of the law even more difficult to obtain. Without a written reasoned decision, a court considering vacatur based on manifest disregard of the law would have to find clear and convincing evidence of manifest disregard of the law in the record of the arbitration—a nearly impossible task.^[27]

Based on the foregoing, successful requests for vacatur of an arbitration award based on manifest disregard of the law have been exceedingly rare.^[28]

The REI Doctrine, the MDL Doctrine, and RWI Claims

It appears that there have been no cases applying either the REI Doctrine or the MDL Doctrine in the context of RWI claims. On the flip side, it also appears that there have been no cases that have held that either the REI Doctrine or the MDL Doctrine is not applicable in the context of RWI claims.

With respect to the REI Doctrine, there are a number of arguments against applying it in the context of RWI claims, especially where there is an absence of one or more of the REI Factors. That said, however, particularly when the insured is up against an RWI policy provision that the insurer is using as the basis for a no-coverage position, assertion of the REI Doctrine may still be of value to the insured. Moreover, even when the context of an RWI claim does not support application of even the Qualified Version of the REI Doctrine, that does not mean that the reasonable expectations of the insured are irrelevant to resolution of the RWI claim.

There are a number of principles and doctrines in insurance law that have as one of their explicit or implicit underpinnings the reasonable expectations of the insured.^[29] One is the interpretation principle of contra proferentem.

In the January 2021 New York Supreme Court case of WPP Group USA, Inc. v. RB/TDM Investors, LLC, one of the few reported RWI cases in the U.S., the court considered a number of RWI policy exclusions asserted by the insurer.^[30] The court denied the insurer’s motion to dismiss with respect to one of those exclusions on the basis that the insurer’s interpretation of the exclusion “seemingly renders coverage for section 5 breaches illusory. . . . Ambiguities in exclusions must be strictly construed and are ordinarily resolved in favor of the insured.”^[31] The WPP Group court did not explicitly couch the foregoing decision on the REI Doctrine or on the contra proferentem principle, but an argument can be made that the court implicitly gave weight to the insured’s reasonable expectations regarding the exclusion in reaching that decision.

With respect to the MDL Doctrine, application of the deference shown by the courts to the arbitrator’s treatment of the law in an RWI claim dispute arbitration seems inarguable. In addition to the public policy rationale in favor of arbitration reflected in the FAA, particularly with respect to the extremely limited grounds for judicial intervention to help ensure the finality of arbitration, it is also important to keep in mind that (i) an arbitrator’s sense of “equity” may come into play in appropriate circumstances, even though the applicable law might militate in favor of the arbitrator’s reaching a different decision;^[32] and (ii) a person typically does not have to be a lawyer, former judge, or otherwise experienced in the law to serve as an arbitrator.^[33]

As a recent example of the extreme deference to arbitration decisions shown by the courts faced with an arbitration party’s assertion of manifest disregard of the law, the February 2024 Delaware Chancery Court case of SM Buyer LLC v. RMP Seller Holdings, LLC stands out.^[34] The SM Buyer court refused to vacate an arbitration decision in favor of a mergers and acquisitions (“M&A”) buyer, even though the court disagreed with the decision, which had resulted in a negative purchase price owed by the M&A seller (i.e., the arbitration decision required the seller to pay the buyer approximately $47 million and also return to the buyer approximately $40 million of closing purchase price based on a post-closing purchase price adjustment). The court noted that the “Delaware Supreme Court has explained that ‘review of an arbitration award is one of the narrowest standards of judicial review in all of American jurisprudence.’”^[35]

Significantly, the SM Buyer court went on to state: “I would have ruled differently. . . . Here, I suspect the Seller viewed the Buyer’s adjustment as . . . outlandish.”^[36] Nevertheless, the Vice Chancellor “reluctantly confirm[ed] the Award” in favor of the M&A buyer.^[37] And, in November 2024, the Delaware Supreme Court reaffirmed the Delaware Chancery Court’s judgment, thus letting stand the arbitration award requiring the M&A seller to pay the M&A buyer for the “privilege” of the buyer’s acquisition of the target.^[38]

So, putting all of the foregoing together, where are we?

First, if the insured has the choice under the RWI policy of arbitration versus litigation, and the choice of whether or not to have the arbitrator issue a reasoned decision, then the insured should evaluate and make those choices with respect to any given RWI claim dispute with an eye toward whether the policy and the law are more favorable to the insurer or the insured—favoring arbitration and no reasoned decision if the former and other issues are relatively equal.^[39]

Second, if the RWI policy is unfavorable to the insured, particularly by virtue of an exclusion, then an assertion of the REI Doctrine, or at least the suggestion by the insured that it would not be reasonable for the insured to have expected an unfavorable result in favor of the insurer, may well enhance the likelihood of a relatively favorable settlement in favor of the insured.

Third, if applicable law is unfavorable to the insured, then the insured should select a party arbitrator and a third arbitrator more likely to be persuaded by equitable arguments in favor of coverage. The more “legalistic” the insurer’s arguments against coverage are, the more likely the arbitrator may be persuaded by equitable arguments, such as the simple “If not this claim, then what did I [the insured] pay the premium for?”^[40]

Conclusion

Particularly when up against RWI policy provisions or rules of law unfavorable to coverage, two doctrines that an RWI policyholder should consider are the REI Doctrine and the MDL Doctrine. In the context of an arbitration of an RWI claim dispute, the former may be particularly useful, while the latter may make it more likely that the arbitration will result in a favorable final outcome for the insured.

In any event, the awareness of the insurer of the availability of these two doctrines may enhance the likelihood of a favorable settlement for the insured in such a situation. Notwithstanding policy provisions or rules of law that would otherwise encourage an insurer to deny coverage, the risk of an unfavorable outcome to the insurer as a result of these two doctrines may militate in favor of a mutually acceptable settlement of an RWI claim dispute.

Practice Tips for Attorneys for Insureds

Consider the following:

• In the RWI policy arrangement and negotiation phase, try to obtain optionality for the insured with respect to whether any claim dispute will be arbitrated or litigated and whether or not an arbitrator will be required to issue a written reasoned decision.
• If the insured does have such optionality, then be prepared to exercise it strategically when dealing with an RWI claim dispute, based on whether the policy and the law are unfavorable or favorable to the insured or the insurer (all other issues being relatively equal), including signaling to the insurer what such choices might be.
• If the RWI policy or the law is unfavorable to the insured and a claim dispute does go to arbitration, consider the choice of a party arbitrator and a third arbitrator who are not lawyers and who are thus more likely to be persuaded by equitable considerations favoring coverage.
• If the RWI policy is unfavorable to the insured, particularly with respect to an exclusion, consider whether the REI Doctrine may be available to the insured under applicable law. Even if the REI Doctrine is not available, consider how the reasonable expectations of the insured can still be used when presenting the insured’s case.

This article is the seventh in the RWI Practice Insights series by John T. Capetta.

1. This article focuses on U.S. buyer-side RWI policies and U.S. law (primarily Delaware and New York law). The term arbitrator is used in this article to refer to a single arbitrator or an arbitration panel. The doctrine of reasonable expectations of the insured is referred to in this article as the “REI Doctrine.” For a recent compendium of cases on the REI Doctrine generally, see 1 Jeffrey E. Thomas, New Appleman on Insurance Law Library Edition § 5.05 (“Reasonable Expectations Doctrine”) (LexisNexis 2024) [hereinafter Appleman]. See also Reasonable Expectations: Interpreting Insurance Policies in Common Law Jurisdictions (Lyndon F. Bittle, Timothy M. Thornton Jr. & Diane Bucci eds., Am. Bar Ass’n 2016) [hereinafter Reasonable Expectations]. The doctrine of manifest disregard of the law is referred to in this article as the “MDL Doctrine.” For a recent compendium of cases on the MDL Doctrine generally, see Domke on Commercial Arbitration § 38.23 (“Manifest disregard”) (3d ed., Clark Boardman Callaghan 2025) [hereinafter Domke]. See also Comm. on Int’l Commercial Disputes of the N.Y.C. Bar, The “Manifest Disregard of Law” Doctrine and International Arbitration in New York (Aug. 2012) [hereinafter NYCB Committee Report]. ↑

2. Robert E. Keeton, Insurance Law Rights at Variance With Policy Provisions: Part One, 83 Harv. L. Rev. 961 (1970). ↑

3. Id. at 961–62. ↑

4. For a discussion of the difference between a principle and a doctrine, see Kenneth S. Abraham, The Expectations Principle as a Regulative Ideal, 5 Conn. Ins. L.J. 59 (1998–1999). As originally proposed by Keeton, REI was a principle; he later described it as a doctrine. ↑

5. For a discussion of the development of the REI Doctrine generally, see Appleman, supra note 1, § 5.05[1] (“Historical Development of the Doctrine”); Jeffrey W. Stempel, Unmet Expectations: Undue Restriction of the Reasonable Expectations Approach and the Misleading Mythology of Judicial Role, 5 Conn. Ins. L.J. 181 (1998–1999). For examples of commentary regarding the REI Doctrine, see the various scholarly articles set forth in the Symposium on the REI Doctrine, 5 Conn. Ins. L.J. 1 (1998–1999); Arthur J. Park, What to Reasonably Expect in the Coming Years from the Reasonable Expectations Doctrine, 49 Willamette L. Rev. 165 (2012). ↑

6. For a discussion of the contra proferentem principle generally, see Barry R. Ostrager & Thomas R. Newman, Handbook on Insurance Coverage Disputes § 1.05 (“The Contra-Insurer Rule”) (22d ed., Wolters Kluwer 2025). Many, if not most, RWI policies contain a provision purporting to nullify the contra proferentem principle, even though the principle often is not referenced by name. Whether such a provision is effective is beyond the scope of this article (although an argument can be made that the same reasons that would make the contra proferentem principle applicable to an insurance policy would also make such a nullification provision ineffective). In any event, it does not appear that such a provision would nullify the REI Doctrine, principles such as the narrow interpretation given to policy exclusions, or the burden of proof on the insurer with respect to policy exclusions. ↑

7. For a discussion of the REI Factors generally, see, e.g., Park, supra note 5, at 170–75, § III (“Justifications and Rationale in Support of the REI Doctrine”). Some courts have either called into question or disregarded the absence of certain of the REI Factors. See, e.g., with respect to disregard of the relative sophistication of the insurer and the insured REI Factor, Nat’l Union Fire Ins. Co. of Pittsburgh, Penn. v. Rhone-Poulenc Basic Chems. Co., No. 87C-SE-11, 1992 WL 22690, at *8 (Del. Super. Ct., Jan. 16, 1992); Reliance Ins. Co. v. Moessner, 121 F.3d 895, 904–05 (3d Cir. 1997); Alstrin v. St. Paul Mercury Ins. Co., 179 F. Supp. 2d 376, 390 (D. Del. 2002). Note, however, that this issue does not appear to have been addressed under New York law. See Reasonable Expectations, supra note 1, at 253. ↑

8. State Farm Mut. Auto. Ins. Co. v. Johnson, 320 A.2d 345 (Del. 1974). ↑

9. Id. at 347 (internal quotation marks, citation, and footnote omitted). ↑

10. Hallowell v. State Farm Mut. Auto. Ins. Co., 443 A.2d 925, 928 (Del. 1982) (emphasis added). Neither Hallowell nor any subsequent case has explained how this limitation of the holding in Johnson to ambiguities, conflicts, hidden traps or pitfalls, or fine print takeaways permitted the Johnson court to imply an insurer prejudice requirement to the notice provision in the insurance policy in question. Perhaps the court considered the notice provision to be a hidden trap or pitfall. But if a timely notice of claim requirement in an insurance policy is considered a hidden trap or pitfall, what insurance policy requirement would not be a potential hidden trap or pitfall? ↑

11. Reasonable Expectations, supra note 1, at 252 (footnote omitted). ↑

12. See Appleman, supra note 1, § 5.05(3)(c) (“Keeton Rule: Reasonable Expectations Override Explicit Terms”); Ostrager & Newman, supra note 6, § 1.04 (“The Reasonable Expectations Doctrine”). ↑

13. Wilko v. Swan, 346 U.S. 427 (1953). ↑

14. Id. at 436–37 (emphasis added) (footnote omitted). ↑

15. See Domke, supra note 1, at nns.14–18. ↑

16. Id. at nns.1–6. ↑

17. 9 U.S.C. § 10(a). The FAA applies to any “contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction. . . .” 9 U.S.C. § 2. The U.S. Supreme Court has affirmed the broad scope of the FAA by holding that “the term ‘involving commerce’ in the FAA [is] the functional equivalent of the more familiar term ‘affecting commerce’—words of art that ordinarily signal the broadest permissible exercise of Congress’ Commerce Clause power.” Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56 (2003). However, “the Act . . . [is] ‘something of an anomaly in the realm of federal court jurisdiction.’” It “bestow[s] no federal jurisdiction but rather requir[es] [for access to a federal forum] an independent jurisdictional basis” over the parties’ dispute. Hall Street Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 581–82 (2008) (quoting Moses H. Cone Mem’l Hosp., 460 U.S. 1, 25 n.32 (1983)); see also Vaden v. Discover Bank, 556 U.S. 49, 59 (2009). That independent jurisdictional basis for utilizing federal courts would be either subject matter jurisdiction (separate and apart from the FAA) or diversity jurisdiction.

    Both Delaware and New York have “mini” state versions of the FAA applicable to the rare arbitrations not subject to the federal act, each of which sets forth statutory grounds for judicial vacatur. Del. Code tit. 10, ch. 57, § 5714 (2024); N.Y. C.P.L.R. ch. 8, art. 75, § 7511 (2024). Attempting to vacate an arbitration award under such mini FAAs for manifest disregard of the law generally presents an equivalent extremely high barrier to success. See, e.g., SPX Corp. v. Garda USA, Inc., 94 A.3d 745, 750 (Del. 2014). ↑

18. Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008). ↑

19. Id. at 585. Subsequent to the Hall Street decision, certain U.S. circuit courts of appeal have decided that the MDL Doctrine is no longer applicable as grounds for vacatur, not even as a gloss on any or all of the statutory grounds as the Hall Street decision had left open. See Affymax, Inc. v. Ortho-McNeil-Janssen Pharms., Inc., 660 F.3d 281, 284–85 (7th Cir. 2011); Med. Shoppe Int’l, Inc. v. Turner Invs., Inc., 614 F.3d 485, 489 (8th Cir. 2010); Frazier v. CitiFin. Corp., LLC, 604 F.3d 1313, 1324 (11th Cir. 2010). Other U.S. circuit courts, such as the U.S. Court of Appeals for the Second Circuit, decided that the MDL Doctrine is still available post–Hall Street; while others, such as the U.S. Court of Appeals for the Third Circuit (covering the Delaware federal court), reached no decision on the issue. See, e.g., Sabre GLBL, Inc. v. Shan, 779 F. App’x 843, 849 (3d Cir. 2019). For a relatively recent compendium of the various U.S. circuit courts of appeals cases on this issue, see Joshua Daniel Jones & Elizabeth C. Wheeler, Manifest Disregard as Grounds for Vacatur After Hall Street, Am. Bar Ass’n (Mar. 28, 2025).

    The U.S. Supreme Court has declined to resolve this split or provide clarity on how to interpret Hall Street regarding this issue, once in an opinion and also in a number of denials of certiorari subsequent to Hall Street. See Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 672 n.3 (2010) (“We do not decide whether manifest disregard survives our decision in [Hall Street], as an independent grounds for review or as a judicial gloss on the enumerated grounds for vacatur set forth in the [FAA].” (internal quotation marks omitted)); Leslie A. Berkoff, Supreme Court Declines to Grant Certiorari on Whether Manifest Disregard Standard Is Proper Standard for Vacatur Under Federal Arbitration Act, in January 2026 in Brief: Business Litigation & Dispute Resolution (Sara E. Brauerman & Armeen Mistry Shroff, eds.), A.B.A. Bus. L. Today (Jan. 2026) (regarding a case involving Mike (the “Pillow Guy”) Lindell). ↑

20. For a discussion of this standard generally, see Domke, supra note 1, at nns.22–27. ↑

21. Weiss v. Sallie Mae, Inc., 939 F.3d 105, 109 (2d Cir. 2019) (internal quotation marks and citations omitted). ↑

22. Id. (internal citations omitted). ↑

23. Id. (internal quotation marks and citations omitted). ↑

24. See Domke, supra note 1, at n.26. But see J.P. Duffy, Manifest Disregard of the Law—for Factual Errors? The Debate Continues, N.Y. L.J., Jan. 28, 2026. ↑

25. Duferco Int’l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 389–90 (2d Cir. 2003); T.Co Metals, LLC v. Dempsey Pipe & Supply, Inc., 592 F.3d 329, 339 (2d Cir. 2010); EB Safe, LLC v. Hurley, 832 F. App’x 705, 707 (2d Cir. 2020); see Thomas R. Newman & Steven J. Ahmuty, Arbitration Awards—Manifest Disregard of Law, N.Y. L.J., Apr. 30, 2019; NYCB Committee Report, supra note 1, at 9–11. Other courts apply a two-prong test, essentially omitting the second prong of the three-prong test (although it presumably would still be applicable implicitly). See Domke, supra note 1, at n.13. Since the Hurley case in 2020, the Second Circuit and lower federal courts in the Second Circuit seem to have moved to a version of the two-prong test: “first, whether the governing law alleged to have been ignored by the arbitrators was well defined, explicit, and clearly applicable, and, second, whether the arbitrator [sic] knew about the existence of a clearly governing legal principle but decided to ignore it or pay no attention to it.” Spliethoff Transport B.V. v. Phyto-Charter Inc., No. 23-7308-cv, 2024 WL 5165511, at *1 (2d Cir. Dec. 19, 2024) (citation and interior quotation marks omitted). However, no official statement of the move seems to have been made, and some commentators still refer to the three-prong test. ↑

26. SPX Corp. v. Garda USA, Inc., 94 A.3d 745, 750 (Del. 2014) (internal quotation marks and footnote omitted). ↑

27. See Domke, supra note 1, at nn.28–30. ↑

28. See, e.g., id. at nns.23–25. In addition to the rarity of arbitration awards being vacated based on the MDL Doctrine, an arbitration party desiring to challenge an adverse arbitration award also faces the potential imposition of sanctions if it does so without sufficient grounds. See, e.g., DigiTelCom, Ltd. v. Tele2 Sverige AB, No. 12 Civ. 3082 (RJS), 2012 WL 3065345, at *7 (S.D.N.Y. July 25, 2012) (arbitration party unsuccessfully seeking vacatur based, in part, on the MDL Doctrine hit with attorney fees sanction). ↑

29. See, e.g., Dunlap v. State Farm Fire & Cas. Co., 878 A.2d 434, 442 (Del. 2005) (covenant of good faith and fair dealing doctrine). ↑

30. WPP Grp. USA, Inc. v. RB/TDM Invs., LLC, N.Y. slip op. 30160(U), 2021 WL 143480, at *3 (N.Y. Sup. Jan. 15, 2021). ↑

31. Id. (citing Cragg v. Allstate Indem. Corp., 17 N.Y.3d 118, 122 (2011), a non-RWI case). ↑

32. See, e.g., Thomas A. Telesca, Elizabeth S. Sy & Briana Enck, Must Arbitrators Follow the Law?, 41 Franchise L.J. 347, 349–51 § B (“An Arbitrator’s Perspective May Impact the Outcome”) (Winter 2022). ↑

33. See, e.g., id. at 348. ↑

34. SM Buyer LLC v. RMP Seller Holdings, LLC, No. 2023-0957-JTL, 2024 WL 865918 (Del. Ch. Feb. 28, 2024). ↑

35. Id. at *3 (citing and quoting SPX Corp. v. Garda USA, Inc., 94 A.3d 745, 750–51 (Del. 2014)). ↑

36. Id. at *4–5. ↑

37. Id. at *1. ↑

38. RMP Seller Holdings, LLC v. SM Buyer LLC, 329 A.3d 1044 (Del. 2024) (unpublished table decision). ↑

39. The REI Doctrine may also be of import when an RWI insurer’s denial of coverage is grounded in an interpretation of a provision of the acquisition agreement or M&A law rather than an interpretation of a provision of the RWI policy or insurance law. ↑

40. The first RWI claim that the author of this article worked on was already in arbitration when he was engaged by the insurer. The first, and perhaps the most effective, argument that the insured made at the arbitration hearing for that claim was along the lines of “If not this claim, then what does this insurance cover?” ↑