Southern United Fire Ins. Co. v. Howard

• Decision Date: 21 July 2000
• Citation: 775 So.2d 156
• Parties: SOUTHERN UNITED FIRE INSURANCE COMPANY, Consolidated Insurance Management Corporation, and Time Payment Plan v. David HOWARD.
• Court: Alabama Supreme Court

775 So.2d 156

SOUTHERN UNITED FIRE INSURANCE COMPANY, Consolidated Insurance Management Corporation, and Time Payment Plan v.David HOWARD.

1990482.

Supreme Court of Alabama.

July 21, 2000.

Michael D. Knight, P. Russel Myles, and Benjamin H. Kilborn, Jr., of McDowell, Knight, Roedder & Sledge, L.L.C., Mobile, for appellants.

William D. Azar and Elizabeth C. Wible of Azar & Azar, L.L.C., Montgomery, for appellee.

SEE, Justice.

The defendants, Southern United Fire Insurance Company("Southern"), Consolidated Insurance Management Corporation("Consolidated"), and Time Payment Plan ("Time Payment") appeal from the trial court's order denying their motion to compel arbitration of the plaintiffDavid Howard's claims.We reverse and remand.

I.

In 1997, Howard financed the purchase of an automobile from a Montgomery car dealership.¹As a condition of financing, the lender required Howard to obtain an insurance policy covering the car.Howard applied for a six-month policy of insurance, and Southern issued one.Southern states that it mailed the policy to Howard, but Howard states that he does not remember receiving a policy from Southern in the mail.The evidence is undisputed that Howard paid premiums on the policy to cover the car for a period of six-months.The policy contains an arbitration provision.²

Near the end of the six-month policy period, Southern mailed Howard an "Automobile Renewal Quotation," offering to renew Howard's existing policy under the same terms and conditions of coverage.The quotation offered Howard the option to renew his policy for an additional 12-month term, with the payment of the premium in installments—the "12-Month Policy Installment Payment Option."The evidence is undisputed that Howard selected the 12-Month Installment Payment Option.The quotation provides that "if you select the 12-Month Installment Payment Option, the Insurance Premium Finance Contract on the reverse side hereof provided through Time Payment Plan ... shall govern."The evidence is undisputed that Howard signed the insurance-premium finance contract on the back of the quotation.That contract provides, in part, that Time Payment shall pay Howard's premium on his Southern insurance policy and that, in exchange, Howard shall make installment payments to Time Payment.The evidence is undisputed that Howard sent Time Payment a check in the amount of $220.49, representing the down payment and the first installment on the financed premium.The evidence is also undisputed that at no time did Howard cancel his Southern policy.

A dispute arose concerning Howard's payment of premiums.Later, Howard was involved in an automobile accident and, as a result, submitted a claim under the Southern policy.A dispute then arose about coverage under the Southern policy.

In May 1999, Howard sued, among others, Southern, Consolidated, and Time Payment.³Howard alleges that Consolidated is the "managing general agent" of Southern and that he"entered into a contract for insurance with Southern by and through its agent[] ... Consolidated."Howard also alleges that Time Payment "at all times material hereto was acting in concert with ... Southern and Consolidated."Howard similarly alleges that Southern acted through its agent Consolidated.In his complaint, Howard claims that Southern and its alleged agents Time Payment and Consolidated fraudulently, wantonly, recklessly, and negligently "misappropriated his premium payments thereby causing [his] insurance coverage to be wrongfully canceled" and defamed his character by wrongfully canceling his insurance coverage.Southern, Consolidated, and Time Payment responded with a motion to compel arbitration of Howard's claims, based on the arbitration provision in the Southern insurance policy.The trial court denied the defendants' motion, holding: (1)"[t]he arbitration clause lacks the minimal guarantees needed to fulfill the remedial purposes of Alabama law and therefore it is void on its face"; (2)"[f]rom the plain language of the arbitration clause and the evidence presented by Howard a jury could find that he did not knowingly, willfully, and voluntarily agree to waive his right to a jury and a judicial forum for settling disputes"; (3)"[f]rom the plain language of the arbitration clause and the evidence presented by Howard a jury could find that no contract to arbitrate was formed"; and (4)"it would be unjust, unreasonable, unconscionable, or a contract of adhesion to enforce this arbitration contract against Howard."The defendants appeal from that order.

II.

A direct appeal is the proper procedure by which to seek review of a trial court's order denying a motion to compel arbitration.SeeA.G. Edwards & Sons, Inc. v. Clark,558 So.2d 358, 360(Ala.1990);see alsoFederal Arbitration Act("FAA"), 9 U.S.C. § 16(1994)(providing that an appeal may be taken from an order denying a motion to compel arbitration).This Court reviews de novo a trial court's denial of a motion to compel arbitration.SeeFirst American Title Ins. Corp. v. Silvernell,744 So.2d 883, 886(Ala.1999).Section 2 of the FAA,9 U.S.C. § 2, provides in pertinent part:

"A written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."

Section 2 preempts conflicting Alabama law, in particular Ala.Code 1975, § 8-1-41(3), and thereby makes enforceable under federal law a predispute arbitration agreement in a contract evidencing a transaction that involves interstate commerce.SeeAllied-Bruce Terminix Cos. v. Dobson,513 U.S. 265, 273-74, 277, 281, 115 S.Ct. 834, 130 L.Ed.2d 753(1995);Crown Pontiac, Inc. v. McCarrell,695 So.2d 615, 617(Ala.1997).For the FAA to apply and thus preempt state law, (1) there must be a valid, written arbitration agreement and (2) the contract must relate to a transaction involving interstate commerce.SeePrudential Sec., Inc. v. Micro-Fab, Inc.,689 So.2d 829, 832(Ala.1997).The parties do not dispute that Southern's insurance policy relates to a transaction involving interstate commerce, within the meaning of the FAA.Thus, our inquiry is limited to whether there is a valid and enforceable arbitration agreement.

The defendants argue that the arbitration provision in the insurance policy is valid and enforceable because, they say: (1) Howard agreed to the arbitration provision by, among other things, paying monthly premiums, renewing the policy, and submitting a claim under the policy; (2) Howard failed to present sufficient evidence showing that the arbitration provision is an unconscionable contract of adhesion; (3) the arbitration provision is not void for indefiniteness or vagueness; and (4) the language of the arbitration provision clearly and unmistakably states that the parties agreed to submit to arbitration issues of arbitrability, namely, validity, enforceability, and scope.

A.

Under the doctrine of equitable estoppel, this Court has recognized the right of a defendant who is not a party to a contract containing an arbitration agreement to compel a plaintiff who is a party to the contract to submit his claims to arbitration where (1) the language of the arbitration provision is broad enough to encompass the plaintiff's claims against the nonparty defendant, or (2) the language of the arbitration provision does not preclude the nonparty defendant from seeking to compel arbitration and the plaintiffs claims against the nonparty defendant are either (a) based on duties or obligations founded in and intertwined with the contract, or (b) sufficiently intertwined with those against a partydefendant(such as where the plaintiff alleges that the nonparty is the agent of the party or that the nonparty conspired or acted in concert with the party).SeeEx parte Stamey,776 So.2d 85(Ala.2000).Both situations are present here.

First, the language of the arbitration provision in Southern's insurance policy is sufficiently broad to encompass Howard's claims against Consolidated and Time Payment.The contract provides for arbitration of "[a]ny and all disputes, disputed claims and controversies of any nature whatsoever between any insured and Southern United Fire Insurance Company, its agents (or persons or entities alleged to be its agents)."Second, Howard's claims against Consolidated and Time Payment are based on duties or obligations founded in and intertwined with the insurance policy.Howard's complaint makes no distinction among the wrongs alleged to have been committed by the various defendants.He specifically alleges that, under the insurance policy, Time Payment "had the responsibility and duty to make payments to ... Southern through its agent Consolidated" and that Consolidated and Time Payment misapplied his insurance-premium payment and thereby caused the insurance policy to be wrongfully canceled.Therefore, because Southern is entitled to compel arbitration of Howard's claims against it, as we discuss below, Consolidated and Time Payment are also entitled, under the doctrine of equitable estoppel, to compel arbitration of Howard's claims against them.And, third, because Howard alleges in his complaint that Consolidated and Time Payment are agents of Southern and acted in concert with Southern, the claims against Southern and those against Consolidated and Time Payment are sufficiently intertwined.

B.

We disagree with the trial court's statement that a jury could reasonably find that Howard did not assent to the arbitration provision in Southern's insurance policy (the second and third grounds enumerated by the trial court, supra, for denying the defendants' motion to compel arbitration).The evidence in the record is undisputed that Howard paid premiums, renewed his policy, and submitted a...