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Insurance Law

Eighth Circuit Affirms Denial of Insurance Company's Motion to Compel Arbitration

On April 19, the Eighth Circuit affirmed the United States District Court for the Eastern District of Missouri's September 4, 2012 decision in Union Electric Company v. Aegis Energy Syndicate 1225, holding that a policyholder could avoid arbitration based on an Endorsement that conflicted with a policy's arbitration clause. See Union Elec. Co. v. Aegis Energy Syndicate 1225, No. 12-3546, 2013 U.S. App. LEXIS 7840 [enhanced version available to subscribers] (8th Cir. Apr. 19, 2013).

The excess liability policy in the dispute contained an arbitration clause, as well as the following Endorsement:

Notwithstanding anything contained in this Policy to the contrary, any dispute relating to this Insurance or to a CLAIM (including but not limited thereto the interpretation of any provision of the Insurance) shall be governed by and construed in accordance with the laws of the State of Missouri and each party agree [sic] to submit to the jurisdiction of the Courts of the state of Missouri.

Applying Missouri law, the District Court held that the Endorsement was in direct conflict with the arbitration clause, and therefore that the Endorsement controlled.  The District Court also held that, in the alternative, the presence of the two clauses created an ambiguity which must be resolved in favor of the policyholder and against arbitration.

The Eighth Circuit affirmed and held that:

The endorsement thus entirely supplants the condition's mandatory arbitration provision. And we do not see how the lack of reference in the endorsement to particular modes of dispute resolution shows that the parties did not intend to replace the mandatory arbitration provision in the policy; to the contrary, we think it highly revealing that the endorsement nowhere indicates an intent that the grant of jurisdiction that it contains refers only to pre- or post-arbitration enforcement. Even if the policy as a whole were ambiguous as to the mandatory arbitration, and we think it is not, [the policyholder] would still prevail because it would be entitled to have the ambiguity resolved in its favor. Union Elec. Co., 2013 U.S. App. LEXIS 7840 at *6 (internal citations omitted).

The case may be appealed to the Supreme Court and will be important for policyholders to monitor.  If the result stands, policyholders seeking to avoid arbitration may be able to do so if a policy contains a jurisdiction clause or other provision which potentially conflicts with the policy's arbitration clause.

    By Peter A. Halprin, Attorney, Anderson Kill

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