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Fireman's Fund Insurance Co. v. Regions Insurance, Inc.

United States District Court, N.D. Mississippi, Aberdeen Division

April 3, 2018



         Before this Court is Defendant Performance Insurance Services' motions to dismiss, or, in the alternative compel arbitration [11, 22]. In this case, Plaintiff Fireman's Fund Insurance Company ("FFIC") alleges the Defendants failed to provide certain required documents to an insured, and, as a result FFIC was forced to pay out an insurance claim in excess of the stated limits of the insured policy. One of the Defendants, Performance Insurance Services ("Performance") argues that FFIC's claims against it should be dismissed, or alternatively arbitrated pursuant to arbitration provisions contained in the agreements between the two.

         Defendant Regions Insurance, Inc. ("Regions") has filed an indemnity cross-claim against Performance. Performance argues that this cross-claim should also be dismissed, or alternatively, submitted to arbitration. The Court finds that these motions should be granted with respect to compelling arbitration but denied with respect to dismissing the claims.

         Factual and Procedural Background

         In 2014, nonparty Dustin Roberts consulted with Casey Johnson, an employee of Regions, about obtaining insurance coverage for his business. Compl. ¶¶ 6-7. At that time, Regions was acting as a producer for Performance selling FFIC insurance policies, among other insurance products. Compl. ¶ 7. Johnson secured a policy for Roberts through FFIC that included coverage for several vehicles Roberts owned. Id. ¶¶ 7-8. By the terms of the policy, coverage included a single limit of $500, 000 in non-stacking[1], uninsured motorists coverage for each vehicle. Id. ¶ 8.

         On February 2, 2015, while the policy was in effect, Roberts' wife, Tiffany, and his daughter, Kaylee, were driving a vehicle insured under the policy, when they were struck by an uninsured driver. Id. ¶¶ 10-12. Tiffany was killed, and Kaylee was severely injured. Id. ¶ 12.

         Roberts filed an insurance claim with FFIC. Id. ¶ 13. Because the policy provided for non-stacking coverage, FFIC initially believed that maximum recovery amount was $500, 000. However, while investigating the claim, FFIC discovered that Roberts was unaware of the difference between stacking and non-stacking coverage. FFIC also discovered that Roberts had not executed an uninsured motorists coverage election form. Id. ¶ 14. Mississippi law requires that before issuing a policy that provides for non-stacking coverage, the insurer must inform the insured about the limits of non-stacking coverage and obtain an election form from the insured. Miss. Code Ann. §83-11-102.

         Roberts eventually filed suit against FFIC, asserting FFIC's failure (through its agents and subagents) to comply with § 83-11-102 meant that he was entitled to stack the coverage of all of his vehicles. Id. ¶ 15. Despite the fact the policy provided only $500, 000 of coverage, FFIC believed they could not rely on the policy language, and therefore settled with Roberts for $3, 132, 946.00. Id. ¶ 16-17.

         FFIC now brings claims for negligence, negligent training and supervision, breach of contract, and breach of fiduciary duties against Defendants, alleging that Johnson (and therefore Regions, and therefore Performance) failed to discuss the uninsured motorists coverage with Roberts and obtain the election form as required by Mississippi law. As a result, FFIC argues, it was forced to pay Roberts $2, 632, 946 more in insurance proceeds than it should have under the policy. Regions subsequently filed an indemnity cross-claim against Performance arguing that Performance must indemnify Regions for any damages it ultimately pays to FFIC.

         Performance filed a motion to dismiss, or in the alternative, compel arbitration of FFIC's claims against it, arguing that the arbitration provisions in the agreements executed between FFIC and Performance requires the parties to arbitrate this dispute. Performance also filed a motion to dismiss, or in the alternative, compel arbitration of Regions' cross-claim, arguing that Regions cross-complaint failed to state a claim for relief, or alternatively, Regions should be forced to arbitrate its indemnity cross-claim. The Court now addresses those motions in turn.


         1. Performance's Motion to Dismiss, or in the Alternative Compel Arbitration of FFIC's claim

         The Court generally assesses whether the parties agreed to arbitrate the dispute in question using a two-step process: "(1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement." See Gross v. GGNSC Southaven, L.L.C., 817 F.3d 169, 176 (5th Cir. 2016). If the Court finds that the parties have a valid agreement to arbitrate and that the dispute is within the scope of the arbitration agreement, the Court generally examines whether any legal constraints foreclose arbitration of those claims. See Brown v. Pac. Life Ins. Co., 462 F.3d 384, 396 (5th Cir. 2006) (citing Mitsubishi Motors Corp., 473 U.S. at 628, 105 S.Ct. 3346)). Courts must "apply the federal policy favoring arbitration when addressing ambiguities regarding whether a question falls within an arbitration agreement's scope, but... do not apply this policy when determining whether a valid agreement exists." Sherer v. Green Tree Servicing LLC, 548 F.3d 379, 381 (5th Cir. 2008). See Volt Info. Scis., Inc. v. Bd. Of Trs. of Leland Stanford Jr. Univ., 489 U.S. 468, 475-76, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989); Banc One Acceptance Corp. v. Hill, 367 F.3d 426, 429 (5th Cir. 2004) (citing Will-Drill Res., Inc. v. Samson Res. Co., 352 F.3d 211, 214 (5th Cir. 2003)); Westmoreland v. Sadoux, 299 F.3d 462, 465 (5th Cir. 2002). The determination of whether a party is bound by an arbitration agreement is included within the broader issue of whether the parties agreed to arbitrate. Bridas S.A.P.I.C. v. Gov't of Turkmenistan, 345 F.3d 347, 355 (5th Cir. 2003) (citing Smith/Enron Cogeneration Ltd. P'ship, Inc. v. Smith Cogeneration Int'l, Inc., 198 F.3d 88, 95 (2d Cir. 1999)). "The purpose of the FAA is to give arbitration agreements the same force and effect as other contracts-no more and no less." Washington Mut. Fin. Grp., LLC v. Bailey, 364 F.3d 260, 264 (5th Cir. 2004) (citing 9 U.S.C. § 2); see Pennzoil Expl. & Prod. Co. v. Ramco Energy Ltd., 139 F.3d 1061, 1064 (5th Cir. 1998) ("[arbitration is a matter of contract between the parties").

         Performance and FFIC do not dispute that a valid arbitration agreement exists. See Pl.'s Resp. at pp. 1-2. Rather, FFIC argues that the scope of the arbitration provision does not apply to the claims it makes against Performance.

         The Fifth Circuit distinguishes between "broad" and "narrow" arbitration clauses. Baudoin v. Mid-Louisiana Anesthesia Consultants, Inc., 306 Fed.Appx. 188, 192 (5 th Cir. 2009) (citing Complaint of Hornbeck Offshore (1984) Corp.,981 F.2d 752, 754-755 (5th Cir. 1993)). Where the clause is broad, "the action should be stayed and the arbitrators permitted to decide whether the dispute falls within the clause." Hornbeck, 981 F.3d at 754 (citing Sedco v. Petroleos Mexicanos Mexican Nat'l Oil, 767 F.2d 1140, 1145 n. 10 (5th Cir. 1985)). But if the clause is narrow, the court should determine whether the dispute falls within the clause before it refers the matter of arbitration. Id. Where the scope of the clause is "fairly debatable or reasonably ...

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