Today, the Indiana Court of Appeals affirmed–unsurprisingly–that Indiana courts enforce arbitration provisions in insurance policies.
In Pekin Ins. Co. v. Hanquier, the 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.