American Bankers Ins. Co. v. Crawford

• Decision Date: 30 July 1999
• Citation: 757 So.2d 1125
• Parties: AMERICAN BANKERS INSURANCE COMPANY OF FLORIDA v. Norman J. CRAWFORD.
• Court: Alabama Supreme Court

757 So.2d 1125

AMERICAN BANKERS INSURANCE COMPANY OF FLORIDA v. Norman J. CRAWFORD.

1972246.

Supreme Court of Alabama.

July 30, 1999.

Rehearing Denied January 28, 2000.

Michael L. Bell and Wynn M. Shuford of Lightfoot, Franklin & White, L.L.C., Birmingham, for appellant.

Garve Ivey, Jr., and Barry A. Ragsdale of Ivey & Ragsdale, Birmingham, for appellee.

M. Roland Nachman, Jr., of Balch & Bingham, L.L.P., Montgomery, for amicus curiae American General Life and Accident Insurance Company.

Matthew C. McDonald and Christopher Kern of Miller, Hamilton, Snider & Odom, L.L.C., Mobile; and Phillip E. Stano, American Council of Life Insurance, Washington, D.C., for amicus curiae American Council of Life Insurance.

MADDOX, Justice.

American Bankers Insurance Company of Florida ("American Bankers"), the defendant in a pending action, moved to compel arbitration. The trial court denied the motion. American Bankers appealed.¹ We reverse and remand.

Facts and Procedural History

Norman Crawford financed the purchase of his home with a loan from Chemical Mortgage Company. His promissory note to Chemical included a requirement that he obtain insurance on the property. On September 27, 1995, Chemical sent Crawford a letter asking for documentation to show that he had insured his home. In that letter, Chemical wrote:

"Dear Mortgage Customer:

"A review of our file reveals that we do not have a current insurance policy for your property. If you have insurance, please advise your agent to send [us] a copy of your policy....

"We are required by the investor of your mortgage to have continuous evidence of insurance for your property. Because we do not have evidence of continuous insurance coverage, we have obtained temporary coverage to protect your property. When we receive evidence of insurance from you or your agent, we will cancel this temporary coverage back to the effective date of your policy and send a confirmation letter. Your escrow account will not be billed provided you can provide us with continuous evidence of coverage.

"If we do not receive from you or your agent a policy or reinstatement notice, permanent insurance coverage for one (1) year will be issued and mailed to you. The premium for this coverage will be billed to your escrow account."

Because Crawford had failed to provide the documentation requested, Chemical sent Crawford a reminder letter, dated October 27, 1995, which stated in part:

"Dear Mortgage Customer:

"Recently, we notified you that we do not have a valid insurance policy for your property. We have yet to receive evidence of coverage from you or your agent. If you have insurance, please advise your agent to send [us] a copy of your policy....

"Please contact your agent today and have a policy or reinstatement notice sent to us identifying our loan number. If we do not receive either a policy or a reinstatement notice, hazard insurance will be issued and your escrow account charged."

Crawford failed to respond, and Chemical instructed American Bankers to issue a policy of insurance covering Crawford's property for a one-year term. American Bankers did so, and it sent Crawford a letter explaining that it had issued a policy of insurance on his property and that he would be responsible for paying the premiums. That letter also stated:

"If, upon your review, you find that the new policy is not adequate for your needs, contact your agent to secure a new policy that would be acceptable to your mortgage company."

Crawford did not do as the letter suggested.

In December 1995, American Bankers sought the approval of the Alabama Department of Insurance to include arbitration provisions in its policies issued in Alabama. The Department approved the application in January 1996.

In June 1996, in anticipation of the August 1996 expiration of Crawford's policy, American Bankers sent him a package of renewal materials. It appears undisputed that the package included a renewal declaration form offering to renew Crawford's policy for an additional one-year term at a rate of $923. It also appears undisputed that a policy jacket was included with the declaration form and that the jacket stated:

"THIS POLICY JACKET WITH DECLARATIONS PAGE AND ENDORSEMENTS, IF ANY, ISSUED TO FORM A PART THEREOF COMPLETES YOUR HOMEGARD POLICY."

Further, the jacket provided:

"You may cancel this policy by returning it to us or by advising us in writing when at a future date the cancellation is to be effective."

American Bankers also enclosed an arbitration endorsement form with the policy jacket and renewal declaration form. The arbitration form stated, in part:

"ARBITRATION CLAUSE ENDORSEMENT

"It is understood and agreed that the policy is qualified with respect to the following:

"ANY AND ALL DISPUTES, CONTROVERSIES OR CLAIMS OF ANY KIND AND NATURE BETWEEN THE POLICYHOLDER(S) AND THE INSURER ARISING OUT OF OR IN ANY WAY RELATED TO THE VALIDITY, INTERPRETATION, PERFORMANCE

OR BREACH OF ANY PROVISION OF THIS POLICY, AND UPON WHICH A SETTLEMENT HAS NOT BEEN REACHED BY THE POLICYHOLDER(S) AND THE INSURER, SHALL BE RESOLVED, EXCLUSIVELY, BY ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (9 U.S.C SECTION 1 ET SEQ.)."

(Capitalization in the original.) The arbitration endorsement was also listed at the bottom of the renewal declaration page.

In his brief, Crawford asserts that he "took no action to renew the insurance." However, it appears undisputed that he paid the $923 renewal fee. At the end of the second one-year term of insurance coverage, Crawford again renewed his policy by paying the renewal premium.

Crawford later sued, alleging that American Bankers had improperly charged him for insurance coverage that he did not authorize and that he had never agreed to purchase. American Bankers moved to compel arbitration under the provisions of the arbitration endorsement. The trial court held that Crawford had not voluntarily agreed to arbitration. Alternatively, the trial court held that even if Crawford had agreed to arbitration, Alabama's antiarbitration statute, § 8-1-41(3), Ala.Code 1975, "reverse-preempts" the Federal Arbitration Act, under the provisions of the McCarran-Ferguson Act, 15 U.S.C. § 1011 et seq., because, the court held, § 8-1-41(3) is incorporated into the law of insurance by § 27-14-22, Ala.Code 1975. Based on these reasons, the trial court denied American Bankers' motion to compel arbitration.

Discussion

This appeal presents two basic questions:

(1) Whether the trial court erred in holding that Crawford did not agree to arbitrate; and

(2) Whether the trial court erred in holding that, even if Crawford did agree to arbitrate, the arbitration clause is unenforceable, on the basis that under the McCarran-Ferguson Act the Alabama "anti-arbitration statute" (§ 8-1-41(3), Ala.Code 1975) "reverse-preempts" the Federal Arbitration Act.

Before addressing these questions, we note that our review in a case such as this is de novo. Patrick Home Center, Inc. v. Karr, 730 So.2d 1171 (Ala.1999).

I.

We first consider American Bankers' argument that the trial court erred in holding that Crawford had never agreed to arbitration and that American Bankers was therefore not entitled to an order compelling arbitration. The trial court held:

"The insurance policy containing the arbitration clause was not voluntarily purchased by the Plaintiff; it was force-placed on his home. Plaintiff did not read this policy prior to the insurance being placed on his home, and, in fact, only saw these documents after the insurance was force-placed. Plaintiff therefore made no knowing, willing, and voluntary waiver of his right to trial by jury as guaranteed by the United States Constitution and the Constitution of Alabama."

In a similar vein, Crawford alleges that the first policy he was issued did not include an arbitration provision; that he did not understand what arbitration entailed; that in a telephone conversation an employee of American Bankers misrepresented to him the implications of an arbitration agreement; and that he never signed any document including an arbitration provision. Crawford argues that these factors require the conclusion that he did not "knowingly, willingly, and voluntarily" waive his right to a jury trial.

Section 2 of the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (the "FAA"), provides that arbitration agreements in contracts involving interstate commerce are binding.² Further, the United States Supreme Court has held:

"Section 2 of the FAA provides that written arbitration agreements `shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for revocation of any contract.' 9 U.S.C. § 2. Repeating our observation in [Perry v. Thomas, 482 U.S. 483, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987)], the text of § 2 declares that state law may be applied `if that law arose to govern issues concerning the validity, revocability, and enforceability of contracts generally.' 482 U.S., at 492, n. 9, 107 S.Ct. 2520."

Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 686-87, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996) (emphasis added in Casarotto omitted here). Similarly, the Supreme Court has held that arbitration provisions in contracts must be reviewed by state courts "on the same footing as a contract's other terms." Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 275, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995), quoting Scherk v. Alberto-Culver Co., 417 U.S. 506, 511, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974) (internal quotation marks omitted). The Supreme Court wrote:

"[Section] 2 gives States a method for protecting consumers against unfair pressure to agree to a contract with an unwanted arbitration provision. States may regulate contracts, including arbitration clauses, under general contract law principles and they may invalidate an arbitration clause `upon such grounds as exist at law or in equity for the revocation of any contract.' 9 U.S.C. § 2 [emphasis

...