UPS sued Lexington Insurance Company seeking a declaratory judgment that Lexington was obligated to defend and indemnify UPS in an underlying personal injury action and for breach of contract for failing to defend. UPS had entered into a guard services agreement with Lexington’s insured Adelis. The agreement required Adelis to indemnify UPS for liabilities UPS might incur from any injury to an Adelis employee, unless the injury was cased solely by UPS’s negligence. Adelis’s Lexington policy contained an additional insured endorsement that would cover UPS for personal injury caused by Adelis’s employees or Adelis. The policy also contained an arbitration clause providing that “in the event of a disagreement as to the interpretation of this policy, it is mutually agreed that such dispute shall be submitted to binding arbitration.”
Lexington moved to compel arbitration, arguing that the dispositive issue of whether the injury was entirely the result of UPS’s negligence was a matter of policy interpretation that should be arbitrated. The court disagreed and denied Lexington’s motion, reasoning that the arbitration clause was narrow and the issue of UPS’s degree of negligence involved application of the facts to the policy language and not policy interpretation. Thus, the court held, the dispute was not within the purview of the narrow arbitration clause. United Parcel Service v. Lexington Insurance Co., Case No. 12 Civ. 7961 (USDC S.D.N.Y. May 7, 2013).
This post written by Ben Seessel.
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