Arbitration In Insurance Contracts

Lots of insurance policies are issued with arbitration agreements written into them. Almost never, will the person taking out the insurance policy be aware of, or ask about an arbitration agreement being part of the insurance policy. Residents of Dallas, Fort Worth, Arlington, Grand Prairie, Weatherford, or any any city or town in Texas can be adversely affected by these arbitration clauses in the insurance policy.
Lake Texoma Highport, LLC, v. Certain Underwriters at Lloyd’s of London, et. al., is a recent case discussing arbitration clauses in insurance policy’s. This case was decided on December 28, 2009, and is good reading to try and understand the way courts look at arbitration clauses.
Lake Texoma Highport, LLC (“Highport”) owns a marina. In early 2005 and early 2006 and in 2007 Highport instructed defendant Houstoun, Woodward, Eason, Gentle, Tomforde and Anderson, Inc. d/b/a Insurance Alliance (“Insurance Alliance”) to locate a property insurance policy. Insurance Alliance provided Highport with a property insurance agreement from defendant Certain Underwriters at Lloyd’s of London (“Lloyd’s”). Highport suffered damages and filed a claim under the policy. Highport then learned for the first time that CRC Insurance Services, Inc (“CRC”) and Bowood Partners, Limited (“Bowood”) were active participants in procurment of the insurance policy.
Highport settled against Lloyd’s. CRC filed a motion with the court to compel arbitration based upon an agreement between CRC and Insurance Alliance that contained an arbitration clause.
The court discussed how the Federal Arbitration Act (“FAA”) expresses a strong national policy favoring arbitration of disputes, and all doubts concerning the arbitration of claims should be resolved in favor of arbitration. The FAA, leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.
In deciding whether or not to order the litigants to arbitration, the Court must address two questions. First, whether there is a valid agreement to arbitrate, and second, whether the dispute in question falls within the scope of the arbitration agreement.
After stating the above, the Court then began to analyse the situational facts in this case to determine what was appropriate. In the end the parties were ordered to arbitration. A reading of the case gives insight into how courts apply the laws related to arbitration agreements to the particular fact pattern in a case.
The case is a good read for trying to understand how these types of case are decided. If someone finds themselves in a situation where they discover they have an arbitration agreement in their insurance policy, the natural question would be, “What difference does it make in my situation?” For a discussion of this, an Experienced Insurance Law Attorney should be consulted.