Mike Rose’s Auto Body, Inc. v. Applied Underwriters Captive Risk Assur. Co., 16-cv-1864-EMC, 2016 U.S. Dist. LEXIS 133747 (N.D. Calif. Sept. 28, 2016).
A California federal court granted a motion to compel arbitration of a dispute under two reinsurance participation agreements providing workers’ compensation coverage using a protected cell company. After the policyholder brought an action for rescission and other claims after the insurer demanded additional premiums, the insurer moved to compel arbitration.
In granting the motion, the court construed the arbitration clause under the FAA. The court focused on whether the dispute came within the arbitration clause and, if so, whether the arbitration clause had a delegation provision allowing the arbitrators to determine arbitrability and validity of the participation agreements. The court held that the dispute was covered by the arbitration clause and that there was an unmistakable delegation of authority of gateway questions to the arbitrators.
On the first question, the court found that a reference to accounting issues was not a limiting provision on the scope of the arbitration clause. The clause, read as a whole, according to the court, revealed a general intent that the arbitration clause apply broadly to all disputes under the contracts.
On the second question, the court found that that language in the arbitration clause was an express delegation provision similar to others found by other courts, including the US Supreme Court. Moreover, held the court, the clause incorporated the American Arbitration Association rules, which have been interpreted to include a delegation provision. Accordingly, the court determined that, under the arbitration clause, the arbitrator had the sole power to determine the enforceability of the reinsurance participation agreements and all their provisions.