S. Jersey Sanitation Co. v. Applied Underwriters Captive Risk Assur. Co., No. 14-4010, 2016 U.S. App. LEXIS 19245 (3d Cir. Oct. 25, 2016).
The Third Circuit Court of Appeals reversed a district court’s order denying a reinsurer’s motion to compel arbitration of a dispute under a reinsurance participation agreement providing workers’ compensation coverage. After the insured sued for rescission and other claims in state court, the reinsurer removed the action to federal court and moved to compel arbitration. The district court denied the reinsurer’s motion.
The court of appeals vacated the district court’s judgment, stating that, ordinarily, to render an arbitration clause unenforceable a party must allege that the party was fraudulently induced into entering the arbitration provision and not the contract as a whole. The court determined that the insured was challenging the participation agreement as a whole and thus the arbitration provision was enforceable. The court also determined that the arbitrator was to decide the nature of the parties’ participation agreement.