ARBITRATION AWARD JUDGMENT NOT RES JUDICATA, PRECLUDES NO EXTRACONTRACTUAL CLAIMS.
Res judicata was no defense to bad faith and statutory unfair claim handling claims in Fortson-Kemmerer v. Allstate Ins. Co., 198 Wash. App. 387, 393 P.3d 849 (Ct. App., Div. 3, 2017). The defendant underinsured motorist (UIM) carrier tried to preclude these claims with an earlier final judgment that was entered in favor of its policyholder after she successfully arbitrated her underlying UIM claims.
The arbitration did not preclude her bad faith claims, the Court held. The arbitration was on coverage issues and damages covered by UIM. "In this case, [the UIM carrier] will defend in a quasi-fiduciary role," the appellate court ruled.
TRICK OR TREAT! BUT NO ARBITRATION HERE!
In Morrow v. Community Health Sys's, Inc., No. 3-16-cv-1953, 2017 WL 4641797 (M.D. Tenn. October 17, 2017), the Court denied a defendant's motion to compel arbitration. Rarely do any of us quote long passages from any source. For one thing, quoting long swatches of someone else's writing is frowned upon in writing generally, and in writing about legal issues in particular.
But sometimes the way in which the story is told in the original is so concise and to the point that it cannot easily be improved upon.
The First Amended Complaint in this purported class action (Docket No. 73) alleges that Community Health Systems, Inc. (“CHS”) and its direct and indirect subsidiaries (“affiliates”) have a policy and practice of breaching their provider contracts with health insurers, causing monetary damages to third-party beneficiaries of those contracts, including Plaintiff and other potential class members. Plaintiff contends that CHS and its affiliates are required by their provider contracts to submit the bills of insured patients to their respective health insurance carriers and to accept the insurer's contractually agreed-upon discounted payment as full payment for those bills, minus any co-pays or deductibles owed by the patients.
Instead, Plaintiff asserts, the policies and practices of CHS and its affiliates require CHS-owned hospitals to either (1) refuse to submit the medical bills to the patient's health insurance carrier; (2) submit the medical bills to the patient's health insurance carrier, but then refund the insurer's discounted payment and try to collect a larger payment from another source, usually the patient or a third-party tortfeasor; or (3) submit the medical bills to the patient's health insurance carrier, keep the insurer's discounted payment, and then still try to collect the balance of the undiscounted charges from another source, including the patient.
Small wonder that these claims are being pursued in the lawsuit in which they were alleged, albeit under one count or claim: unjust enrichment. The District Court in this case granted the defendant's alternative motion to dismiss as to alleged claims for breach of contract, intentional interference, and conspiracy. The Tennessee Court applied substantive Alabama law to all these claims.
To say again, the Court totally denied the defendant's motion to compel arbitration. Since there was no contract between the parties according to the Court's rulings, it follows that there was no contract provision which could require arbitration.
FREE US ALL FROM MANDATORY ARBITRATION!
Senate Joint Resolution 47 would force people to arbitrate their disputes even if they do not want to.
Joint Resolution 47 would delete the Consumer Financial Protection Bureau's rule prohibiting mandatory arbitration. Understand that the CFPB rule does not require people to sue. Instead the CFPB rule allows people to sue and allows people to arbitrate, but only if they want to.
Repealing the CFPB rule would require mandatory arbitration and take away people's right to join together with other people in any class action to sue.
Urge your United States Senators today to vote for FREEDOM and against Joint Resolution 47!
LENDER FORCE-PLACED AUTO INSURANCE, REPOSSESSION, AND CHURNING HUGE PROFITS.
Other features of this story were addressed in an article published on Monday of this week on Insurance Claims and Issues Blog.
Wells Fargo admittedly placed "collateral protection insurance" on its auto-loan borrowers and forced the premiums onto the borrowers' auto loans. Wells only disputes how many of its customers it did this to.
Wells Fargo also admits that it sometimes force-placed the insurance even when the borrowers already had auto insurance.
Wells Fargo further admits that the force-placed insurance premiums sometimes forced the borrowers into having their cars repossessed because they could not make the payments Wells added to their auto loans.
These admissions come to us courtesy of a report commissioned by Wells Fargo. See Alexa D'Angelo and James Rufus Koren, "Wells Fargo Charged Customers for Unneeded Auto Insurance -- Then Repossessed Their Cars" (Los Angeles Times Online, posted on Friday, July 28, 2017), also accessible at http://www.latimes.com/business/technology/la-fi-wells-fargo-insurance-20170728-story.html.
The consequences of Wells's admitted conduct even go beyond its customers. The pending Consumer Financial Protection Bureau (CFPB) rule prohibiting mandatory arbitration provisions and class-action waivers in consumer contracts is reportedly being held up by the news from Wells. "Some of Wells' auto loan contracts contain arbitration clauses, a spokesman said, which could become a further lightening rod in the dispute over whether customers should be allowed to band together in class-action lawsuits." Kate Berry, "New Wells Scandal Harms Effort to Nix CFPB Arbitration Rule" (American Banker Online, posted on Friday, July 28, 2017), also available by pasting this website into your browser, but be forewarned that American Banker articles all seem to be protected by a paywall requiring a subscription, and this article is certainly one of those: https://www.americanbanker.com/news/new-wells-scandal-harms-effort-to-nix-cfpb-arbitration-rule?brief=00000158-07c7-d3f4-a9f9-37df9bc10000.
Dennis Wall is the author of "Lender Force-Placed Insurance Practices" published by the American Bar Association.
MISSOURI SCHOOL BUS DRIVER DOES NOT HAVE TO ARBITRATE BAD FAITH CLAIMS.
In Leonberger v. Missouri Utd. Sch. Ins. Council, 501 S.W.3d 1 (Mo. Ct. App., E.D., Div. 4, 2016), rehearing and/or transfer denied on June 30, 2016 and again on November 1, 2016 (unreported), a Missouri Court of Appeals held that a Missouri State Statute which bars mandatory arbitration clauses for insurance disputes applied to preclude arbitration of an original insured's alleged bad faith claims (bad faith in settlement, bad faith in defense) and alleged breach of fiduciary duty against his liability carrier and the liability carrier's reinsurance carrier as well.
Section 435.350 of the Missouri Arbitration Act prohibiting mandatory arbitration clauses in insurance contracts does not regulate Appellant's operation as a risk retention group. (Citation omitted.) The purpose of Section 435.350 of the Missouri Arbitration Act is to regulate the business of insurance. (Citation omitted.) The Missouri statute was enacted for the purpose of regulating insurance in that it was designed to regulate the operation of an insurance contract.
Leonberger, 501 S.W.3d 1, under Point III—Preemption.
November 28, 2016, "Shh! WELLS FARGO, INSURANCE CARRIERS, AND SECRET ARBITRATION," and on October 3, 2016, "ARBITRATION OF INSURANCE COVERAGE?"
ARBITRATION OF BAD FAITH CLAIMS DENIED, INJUNCTION AGAINST ARBITRATING GRANTED.
In Portland Gen. Elec. Co. v. Liberty Mut. Ins. Co., No. 3:16-cv-00495-HZ, 2016 WL 4059658 (D. Or. July 27, 2016), two agreements were involved.
First, Portland General Electric ("PGE") had an agreement with a Contractor to build a power plant. That construction contract has an arbitration provision. However, PGE did not sue the Contractor.
PGE also required the Contractor to obtain a Performance Bond from Sureties to indemnify PGE in the event the Contractor defaulted. The Bond is the second agreement at issue here.
PGE made a claim under the Bond. The Sureties refused to pay. PGE sued the Sureties for alleged bad faith, among other things.
The Bond expressly authorized suit against the Sureties in Court. "There is no agreement between PGE and Sureties to submit any proceeding to arbitration." Portland Gen. Elec. Co. v. Liberty Mut. Ins. Co., No. 3:16-cv-00495-HZ, 2016 WL 4059658, at *2 (D. Or. July 27, 2016).
However, the Sureties filed a motion in PGE's case against them, to request arbitration under the Contractor's Construction Contract and to stay PGE's bad faith lawsuit against them. The Contractor quickly claimed against PGE under the Construction Contract and demanded arbitration under the Rules of the International Chamber of Commerce. The Chamber swiftly instituted arbitration proceedings.
To say again, there was no arbitration provision in the Bond issued by the Sureties and PGE did not sue the Contractor. PGE sued the Sureties and filed its own motion to enjoin the Sureties from arbitrating PGE's bad faith claim and other claims against the Sureties.
To the Court, this was a simple case based on the language in the agreements alone: There was an arbitration provision in the Contractor's agreement with PGE, but not in the Sureties' Performance Bond under which PGE made its claims (except for PGE's bad faith claim, of course, which was not under the Bond so much as a result of the Sureties' refusal to perform). "The Court concludes it is not required to stay the case, and it declines to exercise its discretion to impose a stay. Furthermore, the Court enjoins Sureties from participating in [the Contractor's] ICC arbitration." Portland Gen. Elec. Co. v. Liberty Mut. Ins. Co., No. 3:16-cv-00495-HZ, 2016 WL 4059658, at *4 (D. Or. July 27, 2016).
So much for pulling a fast one, at least in this case.
Start-ups are lining up to require their employees to arbitrate labor disputes. "Uber and Lyft, the ride-hailing services, make their drivers sign an arbitration clause." Jessica Silver-Greenberg & Michael Corkery, "Start-Ups Embrace Arbitration to Settle Workplace Disputes" (New York Times Dealbook Online, posted May 14, 2016).
Secrecy seems to be the prime attraction in arbitrating labor disputes. "That secrecy, federal labor officials said, can allow widespread problems to persist because the process bars employees from sharing their experiences with others who might be in similar positions." Jessica Silver-Greenberg & Michael Corkery, "Start-Ups Embrace Arbitration to Settle Workplace Disputes" (New York Times Dealbook Online, posted May 14, 2016).
The results of arbitration will show whether arbitrators rule favorably toward so-called "start-ups" in similar numbers to their rulings in disputes involving large corporations. Start-up corporations have already placed their bets.
What We Have Here Is a Failure to Arbitrate.
Mandatory Arbitration, Waive Jury in Bad Faith Cases?
Photo by NASA/Library of Congress 2014.
I had the good fortune to attend the annual meeting of the American Council on Consumer Interests (“ACCI”) in Clearwater Beach, Florida last week. The ACCI may have assembled the nicest group of people I have ever been around; if they are not in first place for “nicest” in my experience, I cannot recall who would be.
The ACCI members as a group shied away from labels. They did not seem to want to be pinned down even as “academics” or as “regulators.” Their membership is united in its devotion to scholarship regardless of labels. They support one another’s research projects as they focus on the results of their collective research. In short, they focus on evidence.
For example, one presentation featured research which seriously challenges the legal concept of “consent.” In the Roberts Court in Washington, D.C., some five of the Justices accept the notion for example that if a provision is in a contract it only has to be understandable or understood to be legally valid. That point of view is perhaps typical of the law in the abstract, namely, from the point of view of the actor, of the defendant charged with not doing enough to make a contract provision understandable, in this case.
The presentation at the ACCI which touched upon this concept shows that from the point of view of the recipient of the information, even though the contract language may be understood it is still not believed particularly when the contract language would, if enforced by the Courts, take away Constitutional rights. In other words, simply because a contract is understood to take away Constitutional rights does not make many people believe that a contract can do that; it is just the opposite for many people. Here is the publicly available abstract of the research article underlying this presentation: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2516432. The results show the recipients’ point of view of the concept of consent, then: Even though something is understood does not make it true.
In the arena of forced arbitration clauses, five of the current Justices on the U.S. Supreme Court reach the opposite conclusion from the point of view strictly of the party writing the contract: If it is understood, there is consent regardless of whether the provision takes away even Constitutional rights.
Please Read The Disclaimer. ©2015 by Dennis J. Wall, author of "Lender Force-Placed Insurance Practices" (American Bar Association 2015). www.lenderforceplacedinsurance.com. All Rights Reserved.
YOU, ME, OUR CLIENTS MAY BE CONTRACTING OUR RIGHTS AWAY.
A current majority of the U.S. Supreme Court has given effect to a variety of jury trial waivers in various contracts. The contracted waivers of jury trial they have approved go beyond waivers to affirmative agreements: to arbitrate rather than sue, to arbitrate in a certain venue, or to arbitrate according to the usual practice in arbitration proceedings without a record of the proceedings, among other things.
Not-necessarily scientific comments to a survey reflect that many people do not believe what I have just written in the first paragraph above. See Jeff Sovern, "Comments From the Arbitration Study Respondents: Contracts Can't Take Away Your Rights as an American Citizen" posted on November 4, 2014 on Consumer Law & Policy Blog.
Believe it. What is true for me is true for all of us, I am afraid: I cannot do anything about the way things are until I know the way things are.
Mandatory arbitration provisions are becoming commonplace. They are particularly favored by a current majority of the U.S. Supreme Court, which helps to explain their popularity. Mandatory arbitration clauses cannot always be used to compel arbitration, however.
In the case of Griswold v. Coventry First LLC, 2014 WL 3892995, 2014 U.S. App. LEXIS 15362 (3d Cir. August 11, 2014), the mandatory arbitration provision was typical. It was very broad: The arbitration clause encompassed “[a]ll disputes and controversies of every kind and nature between the Parties arising out of or in connection with this Agreement.” [Emphasis added.] The Third Circuit panel in this case described this provision accordingly: "By all accounts, the language in the arbitration provision is fairly standard and interpreted to apply broadly."
The decisions in this case by the U.S. District Court and by the Third Circuit have been concisely summarized in words that cannot be surpassed in their brevity: The Third Circuit "affirmed a federal judge in Pennsylvania's ruling denying a motion to compel arbitration ... because the allegations in his complaint stem from conduct that occurrred separate from the agreement," said Mealey's Insurance in their post on August 12, 2014.
The plaintiffs did not sign the contract that contained the mandatory arbitration provision. They alleged that in a separate agreement with someone else, but not them, the defendant, which the Third Circuit panel described as "a Pennsylvania-based insurer and significant player in the life settlement industry," engaged in conduct giving rise to their alleged claims of "common law fraud, fraudulent concealment, conversion, aiding and abetting the breach of fiduciary duties, unjust enrichment, and also violated state life settlement acts, the Sherman Act, and the Racketeer Influenced and Corrupt Organizations Act (RICO)."
alleged their injury without mention of the purchase agreement. Put simply, Appellees do not allege breach of the purchase agreement; they allege fraud antecedent to the purchase agreement.
The Federal Courts' rulings in this life insurance case are broad enough to extend to all insurance contracts -- and to most if not all other forms of contracts too.