The Court of Appeals of Georgia recently affirmed a trial court’s ruling compelling arbitration in a malpractice coverage dispute. McLarens Young International Inc. (McLarens) and American Safety Casualty Insurance Company (ASCIC) shared a claims handling agreement (CHA) that required McLarens to provide the insurer with claims management and adjustment services for ASCIC policies issued under a Lawyers Professional Liability Program. Under one of those policies, ASCIC was required to pay the $2 million policy limits to satisfy a malpractice settlement. ASCIC then sought reimbursement from its reinsurer, Excalibur Reinsurance Corp. (Excalibur), and the reinsurer paid.
Both McLarens and Excalibur filed a demand for arbitration against McLarens for a claim of negligent oversight of the underlying claim. McLarens countered in the trial court that the arbitration demand was outside the scope of the CHA’s arbitration provision. Both the trial court and the appellate court disagreed, holding that “the dispute pertains solely to whether McLarens is required to indemnify ASCIC under the terms of the CHA, and there is no greater or lesser right to indemnification because Excalibur has been inserted into the proceedings.” Because of the Reinsurance Agreement with ASCIC, Excalibur is merely subrogated to any right to indemnification that ASCIC may have against McLarens under the CHA due to the negligent handling of the claim. The appellate court held that the scope of the suit remains the same as if it were only between McLarens and ASCIC and, thus, is within the scope of the arbitration clause.
McLarens Young International, Inc. v. American Safety Casualty Insurance Co., et al., No. A15A0932 (Ga. App., 4th Div. Nov. 20, 2015).