In this week's Alabama Law Weekly Update, we discuss a recent decision of the Alabama Supreme court enforcing an arbitration agreement where a group of customers disputed ever even receiving notice of the agreement.

American Bankers Insurance Company of Florida v. Gladys Tellis, et. al. [1131244, June 26, 2015] (Ala. 2015) (holding that stand-alone, unsigned arbitration agreement was binding on policyholders when incorporated by reference into the insurance policy).

Five customers separately brought claims against their insurance company alleging that the insurance company overinsured the customers to the point the customers could never receive the policy limits, even in a total loss. In response to each of these cases, the insurance company attempted to compel arbitration based upon the arbitration agreement incorporated by reference into each insurance policy. The arbitration agreement was a separate, stand-alone agreement indirectly referenced and incorporated into each of the policies. None of the customers signed the stand-alone arbitration agreement form even though there was a signature line on it, and each of the customers claim they never received the arbitration waiver until after litigation commenced. The insurance company argued that the customers were nonetheless bound by a form included in their insurance policies which referenced the binding arbitration agreement. The lower court refused to enforce the arbitration agreements, the insurance company appealed, and the cases were consolidated to consider the issue on appeal.

Upon review, the Alabama Supreme Court reversed the lower court, holding that the customers' acceptance and renewal of their insurance policies constituted an implicit ratification of the insurance company's binding arbitration policy which was incorporated by reference. The court concluded that, although the customers “did not execute stand-alone arbitration agreements or necessarily even read or receive the insurance policies containing the arbitration provisions, they have nevertheless manifested their assent to those policies and, necessarily, the arbitration provisions in them.” Essential to the court's holding was the payment of premiums and renewal of the policies which ratified the terms of the policies, regardless of receipt of the stand-alone arbitration agreements.

After concluding the customers assented to the arbitration agreements, the court determined that the sale of the policies affected interstate commerce – a requisite of enforcing an arbitration agreement in Alabama, and rejected the customers' argument that the agreement was unconscionable. The court reversed and remanded the cases for the trial court to compel arbitration.