Court Concludes that Arbitration Clause is Broad Enough to Cover Dispute

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Joiner v. Performance Insurance Services, Inc, 2010 U.S. Dist. Lexis 133358 (S.D. MS. December 16, 2010)

In a dispute over whether to compel arbitration, an insurance agent in Mississippi entered into a producer agreement with an Indiana company pursuant to which it solicited and submitted 80 insurance policies.  After a complaint was made by the agent to the Mississippi Department of Insurance regarding the Indiana company’s practice of charging an inspection fee on each policy regardless of whether or not an inspection was being performed, the Indiana Company sent a letter stating that it was terminating the agreement.  The agent subsequently filed a suit in federal court in Mississippi for tortuous interference with contractual relations and breach of duty of good faith and fair dealing, alleging that the Indiana company improperly terminated the agreement to punish the agent for filing the complaint.

The Indiana company sought to dismiss the action without prejudice and an order that the agent must submit its claims to arbitration pursuant to the agreement’s mandatory arbitration clause.  The clause provides as follows:

            In the event of any dispute, claim or controversy concerning, arising out of or     relating to this agreement, its effect, the breach thereof, or the transactions   contemplated  by it, the same shall be settled by arbitration in accordance with the             Commercial Arbitration Rules of the American Arbitration Association.

The arbitration clause stated that the arbitration proceedings must take place in Indiana and that the results of the arbitration shall be final and binding.  There were no exceptions or limitations to the agreement's arbitration clause.  The agent contended that the arbitration clause did not apply to their claims because they did not bring a breach of contract action.

Citing the acceptance and enforceability of such arbitration clauses under 9 U.S.C.A § 2, the court noted that the agreement was valid and did not limit its application to breach of contract claims.  The court held that broad arbitration provisions such as the one in this action are deemed to cover all possible claims that might arise.  Determining that it would not be unconscionable to compel arbitration, the court further held that there were no legal constraints to prevent it from enforcing the arbitration.

For a copy of the decision click here

Bryan Richmond and Jeffrey Kingsley