Sims v. Clarendon Nat. Ins. Co.

• Decision Date: 22 September 2004
• Docket Number: No. 04-60401.,04-60401.
• Citation: 336 F.Supp.2d 1311
• Parties: Iris SIMS, Plaintiff, v. CLARENDON NATIONAL INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Florida

Page 1311

336 F.Supp.2d 1311

Iris SIMS, Plaintiff, v. CLARENDON NATIONAL INSURANCE COMPANY, Defendant.

No. 04-60401.

United States District Court, S.D. Florida, Miami Division.

September 22, 2004.

COPYRIGHT MATERIAL OMITTED

Lawrence David Bache, Pembroke Pines, FL, for Plaintiff.

Daniel D. Whitaker, E. Ashley McRae, Carey O'Malley Whitaker & Manson, Tampa, FL, Bradley Seldin, Steven M. Ziegler, Hollywood, FL, for Defendant.

ORDER ON PENDING MOTIONS

ALTONAGA, District Judge.

THIS CAUSE came before the Court upon Defendant, Clarendon National Insurance Company's Motion to Dismiss or Alternatively, to Stay Litigation and Compel Binding Arbitration (D.E. 4-1, 4-2 & 4-3); and Plaintiff, Iris Sims' Motion for Leave to File Affidavit of Iris Sims in Support of her Response to Clarendon's Motion to Dismiss, or Alternatively to Compel Binding Arbitration (D.E.15). The Court has carefully considered the Motions, the written submissions of the parties, the pertinent portions of the record, and applicable law.

I. Sims' Motion for Leave to File Affidavit of Iris Sims

Plaintiff, Iris Sims ("Sims"), seeks leave to file her Affidavit in response to Defendant, Clarendon National Insurance Company's ("Clarendon") Motion to Dismiss, or Alternatively to Stay Litigation and Compel Binding Arbitration ("Clarendon's Motion").

The party opposing a motion to compel arbitration or to stay litigation pending arbitration "has the affirmative duty of coming forward by way of affidavit or allegation of fact to show cause why the court should not compel arbitration." Aronson v. Dean Witter Reynolds, Inc., 675 F.Supp. 1324, 1325 (S.D.Fla.1987). "This burden is not unlike that of a party seeking summary judgment." Id. (citing Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). Therefore, "[t]he party opposing arbitration should identify those portions of `the pleadings, depositions, answers to interrogatories, and ...' affidavits which support its contention." Id. See also Bertram v. Beneficial Consumer Discount Co., 286 F.Supp.2d 453, 456 (M.D.Pa.2003) (in the context of a motion to compel arbitration, or to stay pending arbitration, "the court may consider the pleadings, documents of uncontested validity, and affidavits or depositions submitted by either party").

Sims is granted leave based on good cause shown, and the Court has considered Sims' Affidavit in resolving Clarendon's Motion, as well as the Complaint and the documents attached as exhibits to the Complaint, the validity of which is uncontested.

II. Clarendon's Motion to Dismiss, or to Stay Litigation and Compel Arbitration

A. Factual and Procedural Background

Sims, a resident of the State of Florida at all relevant times, applied for and purchased health insurance coverage under a Group Short Term (one year) Major Medical Expense Insurance Policy issued to her by Clarendon. The policy is entitled "The Competitor 12 × 3 Flex Term Major Medical Short Term Medical Plan, Policy Number 027-40-9679" (the "Policy"), with an effective date of coverage of May 25, 2003.

There are several relevant provisions in the Policy and other governing documents. The Certificate of Insurance issued to Sims has the following provision:

30 DAY RIGHT TO RETURN THE GROUP POLICY

If for any reason You are not satisfied with this Certificate, You may return it to Clarendon within 30 days after You receive it. We will refund any premium paid and the Certificates issued under the Group Policy will be deemed void, just as though it had not been issued.

(Compl.Ex. A, p. 4). Moreover, the Certificate of Insurance states that "the Policyholder ... may be inspected at any reasonable time on request." (Id.). The Policy states in section GP-20, that "[t]he Certificate [of Insurance provided to the Policyholder] describes the main features of the Group Policy.... In the event of any conflict, the terms of the Group Policy will govern." (Id. at p. 17 (numbered 14)).

Section GP-20, entitled "General Provisions," contains an arbitration agreement (the "Arbitration Agreement"), which provides:

Arbitration: Any disputes which You may have under the Group Policy or otherwise with Us or Our authorized Administrator must be arbitrated in accordance with the commercial arbitration rules of the American Arbitration Association ["AAA"]. The right of arbitration may be invoked by either You or Us or both. Judgment upon any arbitration award may be entered in a court of proper jurisdiction. Judicial review is limited in accordance with applicable law.

(Id. at p. 17 (numbered 14)) (emphasis added). Another clause in Section GP-20 provides:

Legal Proceedings: No proceedings to obtain benefits under the Group Policy may be brought against Us until the expiration of 60 days after proper written proof of loss and any other documentation necessary to establish what benefits are due under the provisions of the Group Policy have been received by Us. No proceedings may be brought more than 3 years after proof is required to be filed.

(Id. at p. 18 (numbered 15)). Additionally, the Policy contains a merger or integration clause that reads as follows:

Entire Contract: The entire contract consists of the Group Policy, the Application of the Association, Your application form and any other documents requested and accepted by Us. No change in the Group Policy or Your Certificate is valid unless approved by Our executive officer. Such approval must be signed by the officer and attached to the Group Policy and Certificate. No broker, agent or producer can change or waive any provision of the entire contract or any of Our requirements.

(Id.). Finally, the Policy includes the following provision:

Conformity with Statutes: Any provision of the Group Policy that is in conflict with the statutes of the jurisdiction in which the Policyholder is located on such date is hereby amended to conform to the minimum requirements of such statutes.

(Id. Ex. A, p. 18 (numbered 15)) (emphasis added).¹

On or about June 3, 2003, Sims was first informed that she had acute leukemia and began to undergo treatment for this condition soon thereafter, including hospitalization. It is alleged that since June 3, 2003, Sims has incurred and continues to incur medical expenses in connection with the treatment of her leukemia in an amount exceeding $350,000. Sims further alleges that she paid her monthly premiums for coverage under the Policy in a timely manner on the fifteenth day of each month via an automatic deduction from her credit card account. Sims filed a claim with Clarendon for benefits under the Policy to pay the cost of her treatment for leukemia. Sims alleges that Clarendon breached its contract of insurance with Sims by refusing to pay benefits under the Policy to cover the cost of the treatment of her leukemia.

By letter dated October 8, 2003 from the company that administered the Policy for Clarendon, Health Plan Administrators, Inc., Sims was informed that the medical expenses she had incurred or would incur in connection with the treatment of her leukemia would not be covered on the basis that these charges were excluded under a pre-existing condition clause in the Policy. The letter stated, inter alia, that a review of her medical record indicated that she had been suffering from symptoms of leukemia before the effective date of the Policy. Sims appealed the denial of benefits, but lost the appeal based on the pre-existing condition clause in the Policy.² Sims has never been paid the claimed benefits under the Policy.

On February 20, 2004, Sims filed her one-count Complaint for breach of contract against Clarendon. On April 2, 2004, Clarendon filed a Motion to Dismiss, or Alternatively to Stay Litigation and Compel Binding Arbitration. In its Motion, Clarendon asserts that, by virtue of the Arbitration Agreement between the parties, the present dispute is subject to compulsory arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. § 1, et seq. (hereinafter referred to as the "FAA"). Clarendon relies on the foregoing provisions of the parties' Agreement, as well as the FAA, to urge that Sims be compelled to submit her claim to arbitration. Sims has responded with several arguments as to why Florida law, rather than the FAA, should apply in deciding whether to enforce the Arbitration Agreement, and why the Agreement is unconscionable and conflicts with other provisions in the Policy.

B. The FAA Governs Enforcement of the Arbitration Agreement

1. The FAA Covers this Insurance Coverage Dispute

The parties dispute whether the FAA or Florida law should be applied to the Arbitration Agreement. The FAA establishes a general federal policy favoring arbitration. See Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 217-18, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985). In Section 2 of the FAA, the Act requires the enforcement of arbitration clauses in contracts covered by the provisions of the Act, stating:

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2. The Supreme Court has recognized that "Section 2 is a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).

The term "commerce" as used in Section 2 of the FAA means interstate commerce. See 9 U.S.C. § 1 ("`[C]ommerce', as herein defined, means commerce...