Opinion ID: 2584681
Heading Depth: 2
Heading Rank: 2

Heading: The Follow-Form Endorsement Incorporates the Primary Policy's Arbitration Clause in this Case

Text: Whether a follow-form endorsement incorporates the terms and conditions, such as an arbitration clause, of the underlying policy is an issue of first impression in the Colorado courts. In this case, Great American's UM/UIM endorsement includes specific terms and conditions that define its UM/UIM coverage. These terms and conditions constitute the form of Great American's UM/UIM coverage and what the parties intended the coverage to include. Great American's UM/UIM coverage includes the arbitration clause, which gives the parties the right to compel arbitration of disagreements over entitlement to or amount of UM/UIM benefits. National Union's follow-form endorsement of Great American's UM/UIM coverage does not provide any language defining the coverage it endorses. Absent such limiting language, the follow-form endorsement incorporates the form of Great American's UM/UIM coverage. Otherwise, National Union's UM/ UIM coverage would stand undefined, leaving the parties guessing as to what the coverage does or does not provide. The follow-form endorsement requires that National Union assume [a]ny obligation of the Insured under an `Uninsured Motorist' or `Underinsured Motorist' law . . . [where] a policy listed in the Schedule of Underlying Insurance provides this coverage. The substance of this obligation is defined by the terms and conditions of Great American's UM/UIM coverage, and the parties agreed to those terms and conditions via the follow-form endorsement. National Union could have explicitly rejected or modified the arbitration clause when it issued its follow-form endorsement; it cannot now attempt to avoid a term of the underlying coverage when its endorsement follows the form of that coverage. Accordingly, we determine that National Union's follow-form endorsement subjects it to the arbitration clause contained in Great American's UM/UIM coverage. Consequently, National Union is a party to a valid arbitration agreement. Our holding is supported by Colorado's public policy favoring arbitration as a mechanism of alternative dispute resolution. See Lane, 145 P.3d at 678. Authorities from other jurisdictions also support our construction that a follow-form endorsement generally incorporates the terms and conditions of the underlying policy, absent an express limitation to the contrary. E.g., Lexington Ins. Co. v. W. Pa. Hosp., 423 F.3d 318, 322 (3d Cir.2005) (follow-form policy incorporated the terms and conditions of the primary [] policy); Sphere Drake Ins. Ltd. v. All Am. Ins. Co., 256 F.3d 587, 589 (7th Cir.2001) (follow-form policy logically includes an arbitration agreement in the underlying contract); Boeing Co. v. Agric. Ins. Co., No. C05-921C, 2005 WL 2276770, at  (W.D.Wash. Sept.19, 2005) (Excess insurers constructed their policies to `follow form' on [primary insurer's] policy, so that each knew of and expressly incorporated the arbitration provision in [primary insurer's] policy . . . . The excess carriers will not be heard to complain of the effect (or lack thereof) of arbitration clauses they had every opportunity to modify or reject in their own policies with [insured].); Safety Nat'l Cas. Co. v. Cinergy Corp., 829 N.E.2d 986, 1009 n. 14 (Ind.App.2005) (It is well established in insurance law that a follow form excess policy incorporates by reference the terms of the underlying policy and is designed to match the coverage provided by the underlying policy. (internal quotations and citation omitted)); see also Houbigant, Inc. v. Fed. Ins. Co., 374 F.3d 192, 203 (3d Cir.2004) ([T]he coverage issues presented turn solely on the interpretation of the underlying policy. (internal quotations and citation omitted)); Rausch v. Beech Aircraft Corp., 277 N.W.2d 645, 646 (Minn.1979) (A `follow form endorsement' is designed to `track' or provide the same coverage as a separate underlying policy.); Black's Law Dictionary 821 (8th ed. 2004) (defining follow-form policy as one that adopts the terms and conditions of another insurance policy); 17 Eric Mills Holmes, Holmes' Appleman on Insurance, § 120.1, at 337 (2d ed. 2001) (`Follow Form' excess liability insurance policies generally provide coverage under the same terms as the primary policy for liability . . . .). As the court in Sphere Drake reasoned, [a] follow-form policy must have a form, which is to say that form's terms, to follow. . . . 256 F.3d at 589. We find unavailing National Union's argument that the statement all other terms and conditions of this policy remain[] unchanged functions as an express disclaimer of the arbitration clause. This ambiguous, boilerplate statement appears at the end of each of the National Union policy's numerous endorsements, irrespective of the content of the endorsement. It does not function as an express disclaimer of particular terms or conditions, such as the arbitration clause. To the contrary, it is a nebulous statement incapable of interpretation by reference to any provision of either insurance policy. Because the statement National Union relies upon is ambiguous, we must construe it in favor of arbitration, Lane, 145 P.3d at 678, and in favor of the insured, Nissen, 851 P.2d at 166-67. Accordingly, we find that a reasonable reading of the statementone that comports with our long-standing rules of constructionis that it refers to terms and conditions of National Union's excess liability policy that are unrelated to the follow-form endorsement of Great American's UM/UIM coverage. Because the statement does not function as a disclaimer of or limitation on any of the terms or conditions defining Great American's UM/UIM coverage, National Union's follow-form endorsement binds it to the arbitration clause contained in the Great American policy.