Mississippi Supreme Court Compels Arbitration Regarding GAP Coverage
SAWYERS V. HERRIN-GEAR CHEVROLET CO., INC. (CASE NO. 2008-IA-01370 JANUARY, 7, 2010)
The Mississippi Supreme Court held that it has jurisdiction to consider the merits of an interlocutory appeal regarding whether a claim arising from GAP coverage should be arbitrated. Plaintiff filed a complaint alleging fraud, breach of contract and bad faith against an auto dealer and an insurance company who provided the “GAP Asset Protection Deficiency Waiver Addendum.” The defendants moved to compel arbitration, which was granted by the trial court. Plaintiff then filed a petition for interlocutory appeal, which was granted.
Plaintiff argued that the arbitration agreement was unenforceable because it aided an illegal enterprise in selling and administering unregistered insurance. In addition, plaintiff argued that the insurer was not a party to the agreement and should not be equitably estopped from pursing her claims in court. The defendants argued that the Court has no jurisdiction to consider the appeal under the Federal Arbitration Act, because the trial court’s order was not final.
The court held that an order compelling arbitration is a final decision and that it had jurisdiction to decide on the merits of the appeal. Under a de novo review, the Court found that the agreement was enforceable and, relying on a bulletin issued by the Mississippi Insurance Department, determined that the GAP product was not insurance. The court also held that because the plaintiff relied on the arbitration agreement in her claims against the insurer, the insurer was entitled to arbitration.
IMPACT (ARBITRATION): One of the more recurring issues is whether state law prohibits arbitration by reason of public policy. Given that public policy is in favor of arbitrations, most state law encourages arbitration involving insurance disputes. In this case, however, the court did not have to reach a determination of the preemption issue because that GAP coverage is not considered insurance.
For a copy of this decision, click here: http://tinyurl.com/rr-February-2010-Edition
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