Justia Arbitration & Mediation Opinion Summaries

The case involves Illinois Casualty Company (ICC) and thirty-three models who contested whether arbitration was appropriate based on the assignment of several business insurance policies that ICC issued to B&S of Fort Wayne, Inc., Showgirl III, Inc., and Reba Enterprises, LLC (collectively, "Insured Clubs"). The models alleged that the Insured Clubs used their images for social media advertisements without their consent. The Insured Clubs had insurance policies with ICC, which they tendered for defense and indemnification. ICC denied coverage, leading to a settlement agreement between the Insured Clubs and the models, assigning the Insured Clubs’ rights against ICC to the models.The trial court compelled arbitration between ICC and the models. On appeal, the Indiana Court of Appeals reversed, finding that none of the models’ claims fell within the provision of the arbitration agreement. The models sought transfer to the Indiana Supreme Court.The Indiana Supreme Court held that an agreement to arbitrate in accordance with American Arbitration Association (AAA) rules constitutes “clear and unmistakable” intent to delegate arbitrability to an arbitrator. However, the court found that because no agreement to arbitrate existed between ICC and the Insured Clubs before 2016, the models could not compel arbitration for claims deriving from this period. The court affirmed in part and reversed in part, ruling that models with claims from 2016 and later could compel arbitration, but those with pre-2016 claims could not. View "Illinois Casualty Co. v. Burciaga" on Justia Law

The case involves SKAV, L.L.C., the owner of a Best Western hotel in Abbeville, Louisiana, and Independent Specialty Insurance Company. The hotel was damaged by Hurricane Laura in August 2020, and SKAV filed a claim on a surplus lines insurance policy it had purchased from Independent Specialty. The policy contained an arbitration clause requiring all disputes to be settled by arbitration. However, SKAV sued Independent Specialty in the Western District of Louisiana, alleging that the insurance company had failed to adequately cover the hotel's hurricane damage under the policy's terms. Independent Specialty moved to compel arbitration, but the district court denied the motion, citing a prior decision that concluded that § 22:868 of the Louisiana Revised Statutes voids an arbitration provision in a contract for surplus lines insurance.The case was appealed to the United States Court of Appeals for the Fifth Circuit. The main dispute was the effect of § 22:868 of the Louisiana Revised Statutes on the insurance policy's arbitration clause. The statute bars insurance policies from depriving Louisiana courts of jurisdiction and permits, in limited circumstances, forum- and venue-selection provisions. The court noted that there were conflicting decisions on this issue from district courts in Louisiana and New York.The Fifth Circuit Court of Appeals affirmed the district court's decision. The court concluded that the arbitration clause in the surplus lines insurance policy was void under § 22:868. The court reasoned that the Louisiana Legislature's 2020 amendments to the statute did not reverse the state's longstanding anti-arbitration policy. The court also rejected Independent Specialty's argument that the issue of the arbitration clause's validity must itself go to arbitration, stating that when a statute prevents the valid formation of an arbitration agreement, the court cannot compel arbitration, even on threshold questions of arbitrability. View "S. K. A. V. v. Independent Specialty Insurance Co." on Justia Law

Sun Holdings purchased a workers’ compensation policy from American Zurich Insurance, which required Sun to reimburse American Zurich for the first $250,000 of each claim. American Zurich fulfilled its obligations under the policy, but Sun did not. When Sun received bills, it ignored them without explanation or justification. American Zurich invoked the policy’s dispute-resolution clause, which called for arbitration in Illinois under New York law and the rules of the American Arbitration Association. During the arbitration, Sun offered a series of weak excuses, which the arbitrators dismissed. The arbitrators ordered Sun to pay what American Zurich claimed (approximately $1.1 million plus 9% interest from the time each bill was due) and added almost $175,000 in attorneys’ fees as a sanction for frivolous defense.American Zurich applied to the United States District Court for the Northern District of Illinois for enforcement of the arbitration award. Sun argued that the arbitrators had exceeded their authority by directing it to pay the insurer’s legal fees, citing two sentences in the contract. The district court disagreed with Sun and ordered it to pay the award in full.The case was then brought before the United States Court of Appeals for the Seventh Circuit. The court held that the arbitrators had interpreted the contract when they concluded that its reference to legal fees did no more than adopt the American Rule, which allows each side to pay its own lawyers but does not forbid sanctions for frivolous litigation. The court stated that whether the arbitrators were right or wrong in their interpretation was not its concern. The court also noted that Sun's arguments were requests to contradict the arbitrators’ findings, which the Federal Arbitration Act forbids. The court affirmed the district court's decision and issued an order for Sun to show cause why sanctions should not be imposed for its frivolous appeal. View "American Zurich Insurance Company v. Sun Holdings, Inc." on Justia Law

The case involves the Government Employees Insurance Company (GEICO) and its affiliates, who sued several medical practices in separate actions in the District of New Jersey. GEICO alleged that the practices defrauded them of more than $10 million by abusing the personal injury protection (PIP) benefits offered by its auto policies. The practices allegedly filed exaggerated claims for medical services, billed medically unnecessary care, and engaged in illegal kickback schemes. GEICO's suits against the practices each included a claim under the New Jersey’s Insurance Fraud Prevention Act (IFPA).The practices sought arbitration of GEICO’s IFPA claim, arguing that a valid arbitration agreement covered the claim and that a different New Jersey insurance law allowed them to compel arbitration. However, each District Court disagreed, ruling instead that IFPA claims cannot be arbitrated. The practices appealed to the United States Court of Appeals for the Third Circuit.The Third Circuit Court of Appeals reversed the lower courts' decisions, holding that claims under the IFPA are arbitrable. The court found that GEICO's argument that the IFPA implicitly prohibits arbitration was not persuasive. The court also concluded that GEICO’s IFPA claims must be compelled to arbitration under the Federal Arbitration Act (FAA), as the claims fell under the scope of the arbitration agreement in GEICO's Precertification and Decision Point Review Plan. The court remanded the case with instructions to compel arbitration of GEICO’s IFPA claims against the practices. View "GEICO v. Caring Pain Management PC" on Justia Law

The case involves Christine Matlock Dougherty, who sued U.S. Behavioral Health Plan, California (USB) for claims related to her son's healthcare. Dougherty's son, Ryan, was enrolled in a UnitedHealthcare HMO health plan, which Dougherty had access to through her employer. Ryan admitted himself into a residential treatment facility for severe drug addiction, but USB denied coverage for his stay after three days, arguing that he could be treated at home. Ryan fatally overdosed shortly after his discharge from the facility. Dougherty then sued USB, claiming that its wrongful denial of coverage for Ryan's treatment caused his death. USB petitioned to compel arbitration of her claims, but the trial court denied the petition, stating that USB's arbitration agreement was not enforceable because it did not comply with the disclosure requirements imposed by Health & Safety Code section 1363.1.The trial court denied USB's petition to compel arbitration on the grounds that the arbitration agreement did not comply with the disclosure requirements of Health & Safety Code section 1363.1. The court found that there were two separate contracts, one between Dougherty and UnitedHealthcare, and another between Dougherty and USB. The court ruled that the arbitration agreement in the supplement, which governed Dougherty's claims against USB, did not comply with section 1363.1's disclosure requirements.The Court of Appeal of the State of California Fourth Appellate District Division Two reversed the trial court's decision. The appellate court concluded that USB forfeited its argument that the issue of whether the arbitration agreement was valid under the disclosure requirements of section 1363.1 was delegated to the arbitrator. However, the court agreed with USB that the trial court erroneously denied USB’s petition because USB complied with section 1363.1. The court found that the only "health care service plan" at issue that "includes terms that require binding arbitration" is Dougherty’s plan with UnitedHealthcare, which includes both the EOC and the supplement as components of the plan. Therefore, the court concluded that there was no section 1363.1 violation and reversed the trial court's order denying the petition to compel arbitration. View "Dougherty v. U.S. Behavioral Health Plan" on Justia Law

The case involves the Government Employees Insurance Company (GEICO) and its affiliates, who sued several medical practices in separate actions in the District of New Jersey. GEICO alleged that the practices defrauded them of more than $10 million by abusing the personal injury protection (PIP) benefits offered by its auto policies. The practices filed exaggerated claims for medical services, billed medically unnecessary care, and engaged in illegal kickback schemes. GEICO's suits against the practices each included a claim under the New Jersey’s Insurance Fraud Prevention Act (IFPA).The practices sought arbitration of GEICO’s IFPA claim, arguing that a valid arbitration agreement covered the claim and that a different New Jersey insurance law allowed them to compel arbitration. However, each District Court disagreed, ruling instead that IFPA claims cannot be arbitrated. The practices appealed to the United States Court of Appeals for the Third Circuit.The Third Circuit Court of Appeals reversed the lower courts' decisions and compelled arbitration. The court found that the IFPA does not implicitly prohibit arbitration. The court also found that the IFPA claims before them should be compelled to arbitration under a different New Jersey law. Furthermore, the court concluded that GEICO’s IFPA claims must be compelled to arbitration under the Federal Arbitration Act (FAA). The court held that the arbitration agreement in the Plan covers the IFPA claims and therefore, must compel arbitration. The court also addressed practice-specific issues in the Mount Prospect and Precision Spine appeals. The court concluded that the District Court should not have granted GEICO leave to amend its complaint in the Mount Prospect case. In the Precision Spine case, the court held that the District Court abused its discretion by denying Precision Spine’s motion sua sponte because it was addressed to the unamended complaint. View "GEICO v. Mount Prospect Chiropractic Center PA" on Justia Law

Yasmin Varela filed a class action lawsuit against State Farm Mutual Automobile Insurance Company (State Farm) after a car accident. Varela's insurance policy with State Farm entitled her to the "actual cash value" of her totaled car. However, she alleged that State Farm improperly adjusted the value of her car based on a "typical negotiation" deduction, which was not defined or mentioned in the policy. Varela claimed this deduction was arbitrary, did not reflect market realities, and was not authorized by Minnesota law. She sued State Farm for breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment, and violation of the Minnesota Consumer Fraud Act (MCFA).State Farm moved to dismiss the complaint, arguing that Varela's claims were subject to mandatory, binding arbitration under the Minnesota No-Fault Automobile Insurance Act (No-Fault Act). The district court granted State Farm's motion in part, agreeing that Varela's claims for breach of contract, breach of the covenant of good faith and fair dealing, and unjust enrichment fell within the No-Fault Act's mandatory arbitration provision. However, the court found that Varela's MCFA claim did not seek the type of relief addressed by the No-Fault Act and was neither time-barred nor improperly pleaded, and thus denied State Farm's motion to dismiss this claim.State Farm appealed, arguing that Varela's MCFA claim was subject to mandatory arbitration and should have been dismissed. However, the United States Court of Appeals for the Eighth Circuit dismissed the appeal for lack of jurisdiction. The court found that State Farm did not invoke the Federal Arbitration Act (FAA) in its motion to dismiss and did not file a motion to compel arbitration. The court concluded that the district court's order turned entirely on a question of state law, and the policy contained no arbitration provision for the district court to "compel." Therefore, State Farm failed to establish the court's jurisdiction over the interlocutory appeal. View "Varela v. State Farm Mutual Automobile Insurance Co." on Justia Law

The plaintiff, Kathryn Tornai, filed a lawsuit against her insurance company, CSAA Insurance Exchange, alleging breach of contract and bad faith for not paying her underinsured motorist claim. In response, CSAA filed a motion to compel arbitration, in line with a provision in Tornai's automobile policy. The trial court denied the motion, leading to CSAA's appeal. The Court of Appeal of the State of California First Appellate District Division Two reversed the trial court's decision. It concluded that the parties disagreed over the amount of underinsured motorist damages owed to Tornai, leading to the requirement for arbitration under section 11580.2, subdivision (f) and the terms of the policy. The appellate court found that the trial court erred in denying CSAA's motion to compel arbitration. Therefore, it instructed the lower court to grant CSAA's motion to compel arbitration of the underinsured motorist damages. View "Tournai v. CSAA Insurance Exchange" on Justia Law

The Supreme Court of Alabama dismissed an appeal by the Great American Insurance Company. The insurance company had appealed a lower court's decision denying its motion to invoke the appraisal procedure in a dispute with the Crystal Shores Owners Association, Inc. The dispute arose following damage to the Crystal Shores Condominium complex due to Hurricane Sally and a subsequent bathtub overflow in one of the units. The insurance company argued that the dispute over the amount of loss was subject to an appraisal procedure described in the insurance policy, which it contended was a form of arbitration. The Supreme Court of Alabama held that, regardless of whether federal law or Alabama law controlled the definition of "arbitration" in the Federal Arbitration Act, the appraisal clause in the insurance contract did not qualify as a clause calling for "arbitration". As such, the lower court's denial of Great American's motion did not constitute an order denying a motion to compel arbitration, and the Supreme Court of Alabama dismissed the appeal as one stemming from a nonfinal judgment. View "Great American Insurance Company v. Crystal Shores Owners Association, Inc." on Justia Law

These appeals are about a pending insurance contract dispute between Positano Place at Naples I Condominium Association, Inc., and Empire Indemnity Insurance Company, which issued an insurance policy (the “Policy”) to Positano for coverage of five buildings that Positano owns in Naples, Florida. Following Hurricane Irma, Positano filed a first-party claim for property insurance benefits under the Policy, claiming that Hurricane Irma damaged its property and that the damage was covered by the Policy. Empire determined that there was coverage to only three of the five buildings covered by the Policy but disagreed as to the amount of the loss. Positano sought to invoke appraisal based on the Policy’s appraisal provision. Positano sued Empire in Florida state court, and Empire removed the case to federal court based on diversity jurisdiction. Positano moved to compel appraisal and to stay the case pending the resolution of the appraisal proceedings, which Empire opposed. The magistrate judge issued a report recommending that the district court grant Positano’s motion, and, over Empire’s objection, the district court ordered the parties to appraisal and stayed the proceedings pending appraisal. Empire timely appealed the district court’s order.   The Eleventh Circuit dismissed the appeal. The court concluded that the district court’s order compelling appraisal and staying the proceedings pending appraisal is an interlocutory order that is not immediately appealable under 28 U.S.C. Section 1292(a)(1). The court concluded that the order compelling appraisal and staying the action pending appraisal is not immediately appealable under the Federal Arbitration Act (“FAA”). View "Positano Place at Naples I Condominium Association, Inc. v. Empire Indemnity Insurance Company" on Justia Law