Arbitration Under Insurance Policy

In Allied Professionals Insurance Company v. Fitzpatricket. al., 40 FLW D1070 (Fla. 4th DCA, May 6, 2015), a chiropractor purchased a professional negligence insurance policy.  The insurance policy contained a comprehensive arbitration provision which, among other things, required: 1) any claims by the insured, or anyone claiming on the insured’s behalf, to submit to arbitration; 2) any arbitration take place in California, under California law; and 3) all questions concerning arbitrability be decided by the arbitrators.

Thereafter, the chiropractor’s employer and the plaintiffs in an underling negligence case sued the insurer under Florida Statute Section 627.4136 to try to force it to pay a negligence judgment.  The insurance company moved to compel arbitration.  In opposition, the employer and plaintiffs argued:  1) because they were not named in the policy, no valid agreement to arbitrate existed with the plaintiffs and the chiropractor’s employer; 2) the arbitration provision violated Florida public policy regulating insurance and was unenforceable because the arbitration provision required the arbitration to occur in California under California law; and 3) the chiropractor’s insurance agent “twisted” her into agreeing to the insurer’s policy by not giving her a pro forma copy of the contract to review and not disclosing to her the policy’s terms, including the need to arbitrate in California under California law.

The trial court denied the Motion to Compel arbitration, finding that the arbitration clause “was procured by a material omission or misrepresentation in the contract-making process, and … the contract provision for compelling arbitration is contrary to Florida Public policy because it requires arbitration under California law, thus precluding any enforcement by the insured or judgment holder of rights guaranteed under Florida law.”

The 4th DCA reversed, stating:

The plain language of the arbitration provision states, in pertinent part: ‘Any question as to the arbitrability of any dispute or claim shall be decided by the arbitrator.’  Although the plaintiffs challenged the arbitration provision as a whole, the plaintiffs did not challenge this delegation provision specifically.  Because the plaintiffs did not challenge the delegation provision specifically, the delegation provision remains enforceable as a matter of law.

The 4th then cited and quoted a number of cases supporting this statement.

The 4th also concluded that the arbitration provision was still enforceable even though the plaintiffs were not signatories to the insurance contract.

We conclude that estoppel applies here to bind the plaintiffs to arbitration.  More specifically, the plaintiffs cannot claim they are entitled to the benefit of the policy’s coverage provision while simultaneously attempting to avoid the burden of the policy’s arbitration provision.

The take-away here is the importance of failing to specifically challenge the “delegation provision” in the arbitration clause.  It is a small thing, but this small thing – like so much else in law – likely meant the difference between victory and defeat.

On remand, I would certainly attempt to specifically challenge the delegation provision before the trial court.  From the 4th opinion it is unlikely that this will be successful, but it is worth trying.

Had they specifically attacked the delegation provision it is likely that the provision would have been found unenforceable.  See, U.S. Fid. & Guar. Co. v. Woolard, 523 So. 2d 798, 799-800 (Fla. 1st DCA 1988)

Since appellant’s action for declaratory relief clearly involves coverage questions which, as appellees admit, are matters to be determined by a court, and not by arbitrators, the granting of an arbitration demand in this instance was error. See Nationwide Insurance Company v. Cooperstock, 472 So. 2d 547 (Fla. 4th DCA 1985); Vigilant Insurance Company v. Kelps, 372 So. 2d 207 (Fla. 3d DCA 1979); and Cruger v. Allstate Insurance Company, 162 So. 2d 690 (Fla. 3d DCA 1964).

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