COURT COMPELS ARBITRATION OF COVERAGE ISSUE IN UNDERINSURED MOTOR VEHICLE POLICY
A federal district court has compelled arbitration of a coverage issue arising out of an Underinsured Motor Vehicle Coverage (UIM) policy issued by Farm Bureau Property & Casualty Insurance Company. Farm Bureau had argued that the court must first decide the initial issue of coverage, whether the umbrella coverage section of the UIM policy extended to the insured’s excess damages, before anyone — the court or a panel of arbitrators — could determine whether Farm Bureau’s actions in denying the insured’s claim constituted breach of contract or bad faith. The court disagreed, noting the material difference between the UIM’s arbitration clause and other industry-standard arbitration clauses that refer a narrower question to arbitration. The broader clause, as stated in the UIM policy, refers to arbitration any disagreement between the insured and the insurer as to the right of the insured to recover damages, not just from the tortfeasor but under the provisions of the policy as well. The court found that the broader language includes the arbitration of coverage issues. Kenneth J. Moore, et al. v. Farm Bureau Property & Casualty Insurance Co., Case No. 2:13-CV-01815 (USDC D. Ariz. Jan. 21, 2014).
This post written by Renee Schimkat.
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