Arbitration / Court Decisions

The District of Connecticut recently granted a motion to compel arbitration in a suit brought by Connecticut General Life Insurance Company (“CGLIC”) for a fraudulent overbilling scheme allegedly perpetrated by participating providers of outpatient medical imaging services. The court’s analysis hinged on (1) whether CGLIC’s claim fell within the scope of the arbitration clause at issue and (2) whether the defendants, neither of whom were signatories to the contracts containing the arbitration clause, may enforce the clause against CGLIC, who, though not a signatory either, conceded that it is an intended third-party beneficiary of the contracts.

With respect to scope, the court distinguished between “broad” and “narrow” clauses, relying on CardioNet, Inc. v. CIGNA Health Corp., Case No. 13-cv-191 (E.D. Pa. May 23, 2013), to conclude that the clause, which applied to “[d]isputes arising with respect to the performance or interpretation” of the contracts, was broad and thus deserving of a presumption of arbitrability. The court also invoked judicial estoppel, as a CGLIC affiliate had urged the broad construction in CardioNet, foreclosing CGLIC’s right to later argue for a narrow reading. With respect to the authority of non-signatories to enforce the clause, the court held that, because third-party beneficiaries are bound by the terms of the contracts that benefit them, CGLIC was bound to arbitration as if it were a signatory. The court also held that the non-signatory defendants could compel arbitration because (1) the factual issues of the dispute were intertwined with the contracts containing the arbitration clauses, (2) a parent-subsidiary-like relationship existed between the non-signatory defendants and the signatory imaging servicers, and (3) the conduct underlying the claim involved both signatory and non-signatory parties. Connecticut General Life Insurance Co. v. Houston Scheduling Services, Inc., Case No. 3:12-cv-01456 (D. Conn. Aug. 29, 2013).

This post written by Kyle Whitehead.

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The court compelled arbitration in a dispute over asbestos insurance coverage that had reached an impasse after six years of mediation. The insured sought to compel arbitration against the insurer and the insurer’s nonsignatory subsidiary, which had purportedly separately contracted with the insurer to reimburse a portion of the risk. The court compelled arbitration against the subsidiary because the insured had entered into a broad agreement with the subsidiary to arbitrate disputes related to asbestos claims, and the threshold question of whether the subsidiary agreed to provide insurance coverage was subject to arbitration. The court also compelled arbitration against the signatory insurer over the insurer’s objection that it had a separate written agreement with the insured to resolve disputes only through litigation. The court found that although the insurer never agreed to arbitrate, the insurer had “exploited” the arbitration agreement of its subsidiary by mediating the dispute for six years. The insurer was estopped from avoiding arbitration because the insured had relied on the insurer’s “exploit[s]” to its detriment, having “lost the time value of money” and “spent six years attempting to reach resolution through mediation.” Fintkote Co. v. Indemnity Marine Assurance Co., Case No. 1:13-cv-00935 (USDC D. Del. Sept. 30, 2013).

This post written by Michael Wolgin.

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