Plaintiffs purchased disability insurance from First American National, which later became known as defendant Regions Bank (“Regions”). Plaintiffs also maintained a bank account with Regions and signed a Customer Agreement, which provided that the provisions of the agreement, including the arbitration clause contained therein, would apply to any transaction, business, or relationship plaintiffs had with the bank.
One of the plaintiffs was diagnosed with cancer in 2008 and submitted a claim to Regions under the disability policy. Regions denied the claim, and plaintiffs filed suit citing breach of trust, fraud, misrepresentation, breach of the insurance agreement and bad faith. Regions then moved to compel arbitration pursuant to the arbitration clause in the Customer Agreement. Plaintiffs opposed Regions’ motion to compel on the grounds that the arbitration agreement only applied to the bank account. The district court agreed with plaintiffs and denied Regions’ motion.
On appeal, the U.S. Court of Appeals for the Fifth Circuit noted that it was not being asked to decide whether the parties’ dispute was covered by the arbitration clause, but rather whether the court had the authority to even resolve the issue of arbitrability. Citing to AT&T Techs., v. Commc’ns Workers of Am., 475 U.S. 643 (1986) and First Options of Chi., Inc. v. Kaplan, 514 U.S. 938 (1995), the court stated that the general rule is that the validity of an agreement to arbitrate is an issue for the court to decide, while the issue of arbitrability is for the arbitrator when the parties have clearly evinced an intention to submit that issue to arbitration. The court found that the plaintiffs were not disputing the validity of the arbitration agreement itself, but rather contended that the arbitration provision did not apply to the parties’ dispute. Because the parties agreed that an arbitrator should decide whether a particular dispute was arbitrable, the court granted Regions’ motion to compel.
Click here to review a copy of the Fifth Circuit’s decision, captioned Allen v. Regions Bank No. 2:09-CV-70 (5th Cir. 2010)