Case Title: Celtic Life Ins. Co. v. Lindsey

Citation: 765 So. 2d 640

Docket Number: 1972120, 1972121, 1972188, 1972189

State: alabama

Court: Alabama Supreme Court

Date: 2000-03-10T00:00:00Z

Document:
765 So. 2d 640 (2000)
CELTIC LIFE INSURANCE COMPANY
v.
Kimberly F. LINDSEY.
Celtic Life Insurance Company
v.
Gary P. Lindsey.
Arthur T. Ferrell
v.
Kimberly F. Lindsey.
Arthur T. Ferrell
v.
Gary P. Lindsey.
1972120, 1972121, 1972188 and 1972189.

Supreme Court of Alabama.
March 10, 2000.
Harold F. Herring, Gurley, for appellant Celtic Life Ins. Co.
John D. Herndon of Huie, Fernambucq & Stewart, L.L.P., Birmingham, for appellant Arthur T. Ferrell.
Robert I. Rogers, Jr., of Bedford, Rogers & Bowling, P.C., Russellville, for appellees Kimberly F. Lindsey and Gary P. Lindsey.
ENGLAND, Justice.
Kimberly Lindsey and Gary Lindsey purchased a health-insurance policy from Celtic Life Insurance Company, through its agent Arthur T. Ferrell. Later, after Celtic Life denied payment on a claim, the Lindseys, acting separately, sued Celtic Life and Ferrell, alleging fraud, suppression, bad-faith failure to pay a claim, and breach of contract. Celtic Life and Ferrell moved to compel arbitration of the Lindseys' claims, relying on an arbitration provision contained in the Lindseys' insurance *641 policy. The trial court denied the motions to compel arbitration. Celtic Life and Ferrell, acting separately, have appealed the orders denying arbitration in the two actions filed by the Lindseys. We reverse and remand.
On March 10, 1997, Kimberly and Gary Lindsey applied for health insurance from Celtic Life, an Illinois corporation, through Celtic Life's agent, Arthur T. Ferrell. Celtic Life considered and accepted the application, and on May 1, 1997, it issued the insurance policy. Subsequently, the Lindseys incurred medical expenses that their insurance policy with Celtic Life purported to cover. Celtic Life alleges that the claims were denied because they were based on a medical condition of Mrs. Lindsey that it says preexisted the issuance of the insurance policy but was not disclosed on the application for insurance coverage. Celtic Life denied coverage to the Lindseys and purported to rescind the contract of insurance by tendering a premium refund.
With regard to preexisting conditions, the policy states:
The policy also states:
It is well settled that the Federal Arbitration Act preempts contrary state law and renders enforceable a predispute arbitration agreement contained in a contract that involves interstate commerce. See 9 U.S.C. § 2 and Allied-Bruce Terminix Companies v. Dobson, 513 U.S. 265, 115 S. Ct. 834, 130 L. Ed. 2d 753 (1995). The Lindseys have conceded that the question whether the insurance policy involved and affected interstate commerce is not in dispute. The Lindseys state the issue on appeal as whether a contractual arbitration provision should be enforced after the parties to the contract have rescinded the contract.
The Lindseys argue that Celtic Life rescinded the insurance contract by returning the premium to the Lindseys and, therefore, that the arbitration provision can no longer be enforced.
Alabama Great So. R.R. v. Independent Oil Co., 230 Ala. 222, 224 160 So. 720, 722 (1935) (quoting 6 R.C.L. § 323, p. 942).
A mutual rescission "occurs only where the acts of one party are fully acquiesced in by the other." Matthews v. Martin, 394 So. 2d 943, 944 (Ala.1981) (citing San-Ann Service, Inc. v. Bedingfield 293 Ala. 469, 305 So. 2d 374 (1974)). "[A] mutual rescission consists of the same requisite elements as a legal contract." Id. It includes a meeting of the minds of the parties to mutually release each other from their obligation under the contract, fully settling all rights under the contract. Id.
Celtic Life purported to rescind the insurance contract it had with the Lindseys, by refunding the premium. It is not clear that the parties to the contract at issue here have mutually agreed to rescind it, and the fact that the Lindseys filed an action alleging a breach of contract suggests there was no mutual assent to abandon the contract. The Lindseys argue that there is now no contract because, they say, Celtic Life has rescinded it, and at the same time they argue that they have claims based on that contract, the very contract they argue does not exist. The Lindseys in effect seek to enforce the contract but without the arbitration provision that was contained in it. This present situation is very similar to the situation addressed by this Court in Delta Construction Corp. v. Gooden, 714 So. 2d 975 (Ala. 1998), in which we stated:
714 So. 2d  at 981. Like the plaintiffs in Dyess and Delta Construction, the Lindseys cannot pick and choose between provisions in the contract. Moreover, "`"challenges seeking to avoid or rescind a contract"'" containing an arbitration provision are subject to arbitration. NationsBanc Invs., Inc. v. Paramore, 736 So. 2d 589, 593 (Ala.1999) (quoting Three Valleys Municipal Water Dist. v. E.F. Hutton & Co., 925 F.2d 1136, 1140 (9th Cir.1991)).
The trial court's order denying the motions to compel arbitration is reversed, and the cases are remanded.
REVERSED AND REMANDED.
HOOPER, C.J., and MADDOX, HOUSTON, COOK, LYONS, and BROWN, JJ., concur.
SEE, J., concurs in the result.