Edwards Angell Palmer & Dodge, LLP recently obtained a decision from the U.S. District Court for the Eastern District of New York granting the motion of its clients, American United Life Insurance Company, Inc. (“AUL") and R.E. Moulton, Inc. ("REM”), to dismiss a third-party action against them in favor of arbitration.

The third-party plaintiff, administrator of an employee health plan, is a defendant in the underlying action brought by a medical service provider for alleged failure to pay for dialysis services provided to an employee covered by the plan. AUL insured the plan under a stop-loss insurance policy, which contains a broad arbitration provision. AUL's sister company, REM, was AUL's designated representative in administering the insurance policy, The third-party plaintiff impleaded AUL and REM, seeking contribution in the event the third-party plaintiff is found liable to the medical service provider.

In granting AUL's and REM’s motion, United States District Court Judge Arthur D. Spatt found that “[i]t is beyond contention that this exceedingly broad arbitration clause encompasses [the third-party plaintiff’s] claim.” Although the applicable remedy provided in the Federal Arbitration Act is a stay in favor of arbitration, the Court created a precedent in the Eastern District by holding that where the only claim against AUL and REM was subject to arbitration, no useful purpose would be served by granting a stay, and so granted dismissal.

The decision can be found here or on Westlaw at 2009 WL 579358.