Case Title: UNITED WISCONSIN LIFE INS. v. Tankersley

Citation: 880 So. 2d 385

Docket Number: 1021128

State: alabama

Court: Alabama Supreme Court

Date: 2003-10-10T00:00:00Z

Document:
880 So. 2d 385 (2003)
UNITED WISCONSIN LIFE INSURANCE COMPANY and American Medical Security, Inc.
v.
Susan N. TANKERSLEY et al.
1021128.

Supreme Court of Alabama.
October 10, 2003.
F.A. Flowers III, James E. Fleenor, Jr., and Harlan F. Winn III of Burr & Forman, LLP, Birmingham, for appellants.
*386 Steve Olen, S. Russ Copeland, and Michael A. Youngpeter of Olen, Nicholas & Copeland, P.C., Mobile, for appellees.
STUART, Justice.
United Wisconsin Life Insurance Company and American Medical Security, Inc., appeal from the trial court's denial of their motions to compel arbitration. We affirm.
United Wisconsin is an insurance underwriter and the issuer of the health-insurance policies involved in this action. Its principal place of business is in Wisconsin. American Medical serves as the administrator of the United Wisconsin policies; American Medical's principal place of business is also in Wisconsin. The plaintiffs in the underlying action, Ruth Shuniak, Susan N. Tankersley, Nathaniel Miller, Debbie Miller, and Gregory Shockley (hereinafter referred to collectively as "the plaintiffs") are all individual residents of Alabama.
On March 5, 1996, Ruth Shuniak completed an application for health insurance under a group policy with United Wisconsin. American Medical approved the application in Wisconsin and sent an insurance certificate entitled "Certificate of Group Insurance" and a group insurance policy to Shuniak shortly after she had completed her application. Shuniak renewed the insurance policy annually.
At some point, United Wisconsin issued a rider to Shuniak's policy; the rider added an arbitration provision to the policy. From March 14, 2000, until the present, Shuniak's policy has included the following language:
(Capitalization in original.)
On December 9, 1996, Susan N. Tankersley applied for health insurance under a group policy with United Wisconsin. American Medical approved the application and shortly thereafter sent a certificate of group insurance and a group insurance policy to Tankersley.
On January 8, 2001, Tankersley requested a different co-pay option on her policy. American Medical processed this request and, according to American Medical, it issued another health-insurance certificate that was effective February 1, 2001. This health-insurance certificate included a rider, which added an arbitration provision to Tankersley's policy; the arbitration provision was identical to the one added to Shuniak's policy.
On November 24, 1998, Nathaniel Miller and Debbie Miller applied for health-insurance coverage under a group policy with United Wisconsin, requesting insurance effective December 1, 1998. In connection with their application, Nathaniel Miller signed a document, which the parties refer to as an "Acknowledgment of Arbitration Agreement." The Acknowledgment of Arbitration Agreement form originated with the Alabama Department of Insurance. However, United Wisconsin modified the Department's suggested form. Wherever the Department of Insurance form used the word "policy," United Wisconsin changed the word to "coverage." The Acknowledgment of Arbitration Agreement signed by Nathaniel Miller provided as follows:
"READ THE FOLLOWING INFORMATION CAREFULLY.
(Capitalization in original.)
American Medical processed the Millers' application and sent the Millers a certificate of group insurance and a group insurance policy. The policy contained an arbitration provision identical to the one added by rider to Shuniak's and Tankersley's policies.
On December 28, 1999, Gregory Shockley applied for health insurance with United Wisconsin, requesting that the insurance policy be effective February 15, 2000. In connection with that application, Shockley signed an "Acknowledgment of Arbitration Agreement." The acknowledgment signed by Shockley was identical to the one signed by Nathaniel Miller. American Medical processed Shockley's application in Wisconsin and shortly thereafter sent Shockley a certificate of group insurance and a group insurance policy. Shockley's insurance policy contained an arbitration provision identical to the one contained in Shuniak's, Tankersley's, and the Millers' policies.
On April 10, 2001, Evelyn E. Saucier sued United Wisconsin, American Medical, and others in the Mobile Circuit Court. By the end of May 2002, Saucier's initial complaint had been amended several times and plaintiffs had been added and deleted. Saucier was no longer a party to the action, but Shuniak, Tankersley, the Millers, and Shockley, along with several others, had been made parties to the action.
In their complaint, the plaintiffs allege that they are all current or former policyholders of a United Wisconsin group health-insurance policy, namely "Master Policy Number AB 2000." The plaintiffs allege that United Wisconsin and American Medical, or presumably their agents, marketed this policy to the plaintiffs by representing that it was a group insurance policy and that the premiums charged the plaintiffs were or would be based on the group's claims experience. The plaintiffs allege that beginning in 1998 and continuing throughout 2002, United Wisconsin and/or American Medical increased their premiums at various times in a manner that was not based upon the group's claims experience but upon their individual claims experience. They assert claims of intentional, reckless, and/or negligent misrepresentation; suppression; fraudulent concealment; conspiracy to mislead the plaintiffs concerning the premium increases and the actual basis of the premium charges, conspiracy to constructively cancel the policies of certain policyholders who made certain claims or who suffered from certain medical conditions, and conspiracy to improve the profit margin on the policies; breach of fiduciary duty; and breach of contract.
On August 30, 2002, United Wisconsin and American Medical moved to compel arbitration of the plaintiffs' claims.[1] In *389 support of that motion, they submitted the affidavit of Joseph W. Keen, the director of regulatory affairs for American Medical. They also submitted copies of the insurance application and the insurance policy for each of the plaintiffs.
On March 19, 2003, the plaintiffs filed their opposition to United Wisconsin and American Medical's motion to compel arbitration. As exhibits to their opposition, the plaintiffs filed excerpts from United Wisconsin's health-insurance policy, more specifically, the policy's administrative appeal procedure and the policy's arbitration provision; the affidavit of Nathaniel Miller; a copy of the Acknowledgment of Arbitration Agreement signed by Gregory Shockley, as modified by United Wisconsin; and a blank copy of the Acknowledgment of Arbitration Agreement, which, it is undisputed, is a form suggested by the Alabama Department of Insurance. The plaintiffs subsequently submitted the affidavit of Susan Tankersley in opposition to the motion to compel arbitration.
On April 10, 2003, the Mobile Circuit Court denied United Wisconsin and American Medical's motion to compel arbitration. United Wisconsin and American Medical appeal, asserting that all of the prerequisites of 9 U.S.C. § 1 et seq., the Federal Arbitration Act ("the FAA"), have been met and that, therefore, the trial court erred in denying their motion to compel arbitration and to stay the proceedings.
This Court's review of an order granting or denying a motion to compel arbitration is de novo. First American Title Ins. Corp. v. Silvernell, 744 So. 2d 883, 886 (Ala.1999); Crimson Indus., Inc. v. Kirkland, 736 So. 2d 597, 600 (Ala.1999); Patrick Home Ctr., Inc. v. Karr, 730 So. 2d 1171 (Ala.1999).
The FAA mandates arbitration of a claim where a valid contract containing a written agreement calling for arbitration exists and where the contract evidences a transaction involving interstate commerce. 9 U.S.C. § 2. In this case, the plaintiffs do not contest that the insurance policies are valid contracts containing a written agreement calling for arbitration and that the transactions involved interstate commerce. The issue before us is whether the arbitration provisions are broad enough to encompass the plaintiffs' claims.
As the Court has previously recognized:
Koullas v. Ramsey, 683 So. 2d 415, 416-17 (Ala.1996). See also Cook's Pest Control, Inc. v. Boykin, 807 So. 2d 524, 526 (Ala. 2001) ("It is black-letter law that arbitration agreements must be enforced according to general standards of contract law."); Kenworth of Dothan, Inc. v. Bruner-Wells Trucking, Inc., 745 So. 2d 271, 274 (Ala. 1999) ("Because arbitration is a creature of contract, ordinary contract rules govern the interpretation of arbitration provisions.").
In United Wisconsin Life Insurance Co. v. Beaty, 775 So. 2d 191 (Ala.2000), the Alabama Supreme Court interpreted the same arbitration provision at issue in this case and applied it to claims identical to those alleged in this case. Like the plaintiffs here, the plaintiffs in Beaty were insureds under a group health-insurance policy issued by United Wisconsin. The plaintiffs alleged that they were told the premiums would be based upon the group's experience but that subsequently United Wisconsin increased their premiums on some other basis. The plaintiffs sued, alleging that the premium increases constituted a breach of contract. The remaining counts arose out of activities related to the sale of the policy, including fraudulent inducement, misrepresentation, and suppression.
United Wisconsin sought to compel arbitration based upon arbitration provisions identical to the ones included in Shuniak's, Tankersley's, the Millers', and Shockley's policies. The trial court denied that motion, and United Wisconsin appealed.
On appeal, the Alabama Supreme Court quoted extensively from the trial court's order and adopted that order as its own:
Beaty, 775 So. 2d  at 193-94 (capitalization in original).
Because the Beaty Court found that the scope of the arbitration agreement was limited to disputes regarding only claims for benefits made under the policy, the Court affirmed the trial court's holding that the plaintiffs' claims arising from the sale of the policies and how the premiums were calculated were not subject to arbitration.
As we noted earlier, the language of the arbitration provision considered in Beaty is identical to the language of the arbitration provisions at issue in this appeal. Also, the facts and the claims asserted in Beaty are virtually identical to those of this case. We adopt the rationale of Beaty in this case. The arbitration provision here is not broad enough to encompass the plaintiffs' claims.
United Wisconsin and American Medical argue that Beaty was wrongly decided. They allege that the references in the arbitration provisions to "after exhaustion of an appeal procedure" render the arbitration provisions ambiguous and that ambiguous arbitration provisions should be construed in favor of arbitration. They emphasize that the reach of the arbitration provision could not be any broader because it includes the language "[a]fter exhaustion of an appeal procedure, any further dispute or cause of action of whatever kind or nature arising out of or relating to 1. the policy; 2. certificate; or 3. our insurance practices as they relate to this insurance, must be resolved by arbitration."
We disagree with United Wisconsin and American Medical. The flaw in their argument is that they attempt to ignore the first clause of the sentence"[a]fter exhaustion of an appeal procedure"which provides the context for the remainder of the sentence. United Wisconsin's policy contains the following claim-appeal procedure:
This entire section of the United Wisconsin policy addresses the procedure to be followed when an insured disagrees with the insurer's resolution of a claim. Thus, the clause "after exhaustion of an appeal procedure" places arbitration in the context of a disputed claim.
Moreover, this is not the only reference in the arbitration provision to a disputed claim. We find that the rider adding the arbitration provision is replete with references to arbitration only within the context of a disputed claim. For example, a legal action means the arbitration process; the appeal procedure is applicable only to a disputed claim; a policyholder may not institute legal action (which means an arbitration proceeding) until 60 days after the appeal procedure (which applies only to a disputed claim) has been completed; a policyholder may not institute legal action/arbitration more than three years from the date when written proof of loss (which applies only to a claim) is required; and finally, after exhaustion of the appeal procedure (which applies only to a disputed claim), any further dispute must be resolved by arbitration. Beaty was not wrongly decided.
Additionally, United Wisconsin and American Medical argue that the acknowledgment form signed by the Millers and Shockley somehow enlarged the scope of the arbitration provisions in the policies. Again, we disagree. We find nothing in the language of the acknowledgment that expands the scope of the arbitration provision. In fact, the Acknowledgment of Arbitration Agreement specifically refers to arbitration of coverage-related disputes. This language was drafted by United Wisconsin and American Medical. They specifically changed the language of the acknowledgment to refer to arbitration of coverage-related disputes rather than disputes related more generally to the policy. This further supports the language of the arbitration provision found in the policy itself.
We conclude that the arbitration provision contained in the plaintiffs' United Wisconsin policies is not broad enough to encompass the plaintiffs' claims relating to the sale of the subject policies and the calculation of the premiums. We affirm the trial court's order denying the motions to compel arbitration.
AFFIRMED.
HOUSTON, LYONS, BROWN, JOHNSTONE, HARWOOD, and WOODALL, JJ., concur.
SEE, J., dissents.
[1]  Although the second amended complaint, filed on May 29, 2002, lists numerous other plaintiffs, the motion to compel arbitration filed jointly by United Wisconsin and American Medical addressed only the claims asserted by Shuniak, Tankersley, Nathaniel Miller, Debbie Miller, and Gregory Shockley. Therefore, whether the claims asserted by the other plaintiffs in this action are subject to arbitration is not an issue before us.