Franz v. Allegheny Investments, Ltd. (N.D. Ohio February 11, 2010)
A former employee sought brought suit against his former employer for the employer's alleged failure to promptly notify the relevant insurance carrier and provide defense coverage to the employee for claims made against him and the employer in a Financial Industry Regulatory Authority arbitration. As a result of employer's failures, the employee ultimately had to retain counsel to defend him in the arbitration. At the underlying arbitration, the employer successfully defended the claim, but the former employee was found liable.
The employer asserted that the claims had to be dismised because they were subject to mandatory arbitration. The employee, as part of his professional registration process, agreed to arbitrate claims arising out of his employment. With regard to the suit, however, he asserted that the arbitration agreement did not apply because (1) FINRA excepts insurance disputes, (2) the dispute did not arise out of his employment and therefore outside the scope of the arbitration provision and (3) the employer waived its right to compel arbitration.
The court found that the insurance exception did not apply because the employer was not formally acting as an insurer. The court also found that because the underlying claim related to his employment and no party had sued the insurance carrier, the dispute did relate to employment and therefore was arbitrable. Further, while the court noted it was displeased with the employer's late demand for arbitration, it also found that the employer had not waived the arbitration provision.
A copy of the decision is attached here
Sarah Fang and Joanna Roberto
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