Mississippi Supreme Court Compels Arbitration Regarding GAP Coverage
Wednesday, April 7, 2010
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.
Jeffrey Kingsley maintains an international practice that focuses on matters involving insurance and reinsurance coverage, commercial and regulatory issues, and extra-contractual liability arbitration and litigation. As a leader in Goldberg Segalla’s reinsurance practice he has extensive experience handling and consulting clients on complex reinsurance allocation issues, regulatory issues, arbitrations, transactional issues, and disputes involving the follow-the-fortunes doctrine.
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Thomas F. Segalla, is the co-author of the renowned insurance law treatise Couch on Insurance 3d and is one of the founding partners of the firm. Mr. Segalla is a nationally recognized reinsurance and insurance expert who has been retained by numerous insurance carriers and policyholders. His active practice focuses on the defense and insurance coverage aspects of matters involving bad faith; construction site personal injury accidents (Labor Law §§ 200, 240(1) and 241(6)); and toxic tort and environmental issues. As a member of the Defense Research Institute (DRI), he is the Past Chair of the Insurance Law Committee and served on the Board of Directors and is the past Chair of the Law Institute. In addition, as a member of the Federation of Defense and Corporate Counsel, he is integrally involved in the relationship between the Insurance Industry and defense counsel. He has published and lectured extensively for many professional organizations. Mr. Segalla possesses an AV rating from Martindale-Hubbell and has been named to the Top 50 of the New York Super Lawyers.