Indiana Court of Appeals Enforces Arbitration Provision in UIM Policy

Today, the Indiana Court of Appeals affirmed–unsurprisingly–that Indiana courts enforce arbitration provisions in insurance policies.

In Pekin Ins. Co. v. Hanquierthe plaintiff sustained injuries when she was rear-ended by another car, and then sued the driver of the other car and its insurer, Pekin, for underinsured motorist benefits.  The Pekin policy contained an arbitration provision that said:

If we and an “insured” do not agree:

1. Whether that person is legally entitled to recover damages under this endorsement; or
2. As to the amount of damages;

either party may make a written demand for arbitration. In this event, each party will select an arbitrator. The two arbitrators will select a third. If they cannot agree within 30 days, either may request that selection be made by a judge of a court having jurisdiction. Each party will:

1. Pay the expenses it incurs; and
2. Bear the expenses of the third arbitrator equally.

Unless both parties agree otherwise arbitration will take place in the county in which the “insured” lives. Local rules of law as to procedure and evidence will apply. A decision agreed to by two of the arbitrators will be binding as to:

1. Whether the “insured” is legally entitled to recover damages; and
2. The amount of damages. . . .

Pekin sought to enforce that (fairly typical) provision, but the plaintiffs argued that the word “may” in the phrase “may make a written demand for arbitration” meant that the entire provision was permissive, not mandatory. The trial court sided with the plaintiffs.

The Indiana Court of Appeals, however, read the entire provision and found that it is really a mandatory provision once one of the parties decides to demand arbitration:

Pursuant to the language, arbitration is not mandatory until either the insurer or the insured makes a written demand for arbitration. However, it is clear that once a demand is made by either party, arbitration then becomes mandatory for both of the parties.

The Court of Appeals reversed and remanded with instructions to grant an order compelling arbitration and staying the proceedings against Pekin.

So, parties hoping to avoid arbitrating with insurers in Indiana “may” not want to get their hopes up.

About Brian Jones

I represent clients in all aspects of business litigation, but focus my practice on complex litigation and arbitration matters concerning insurance and reinsurance, antitrust, class actions, securities, real estate disputes, and contract matters. I am the co-chair of the Bose McKinney & Evans Insurance Group. I was listed in the 2017 and 2016 "Best Lawyers in America" for Insurance Coverage and named a "Rising Star" in Insurance Coverage by Super Lawyers in Indiana in 2014. I was also named a "Rising Star" in Business Litigation by Super Lawyers in Indiana in 2013 and 2012, and a 2010 “Rising Star” in Business Litigation in Texas. I am a member of the State Bars of Indiana and Texas, the Defense Research Institute, a former member of the Pro Bono College of the State Bar of Texas, and I am licensed to practice before all state courts in Indiana and Texas, as well as all federal courts in Indiana, the Northern, Western, and Southern Districts of Texas, the Northern District of Illinois, and the United States Courts of Appeals for the Fifth, Seventh, and Eleventh Circuits. I received my bachelor’s degree, cum laude, in political science and my master’s degree in teaching from Trinity University, where I was elected to Phi Beta Kappa. I received my doctor of jurisprudence degree from the University of Texas School of Law, where I was the Director of Communications for the Legal Research Board and a member of the Phi Delta Phi Honor Society. Before attending law school, I taught high school geography, government and economics in San Antonio, Texas.
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