The California Court of Appeal has held that the issue of whether a UM/UIM claimant qualifies as an “insured” is a jurisdictional issue that must be decided by an arbitrator, and that policy provisions that purport to remove such issues from the scope of arbitration are not enforceable. ( Bouton v. USAA Casualty Insurance Company (2006) WL 3743821)
Facts
A third party caused an automobile accident in which Lloyd Bouton was injured. Bouton settled for $15,000, the third party’s policy limits.
Bouton then filed a petition to compel arbitration of a claim for UIM benefits against USAA Casualty Insurance Company, which had issued an automobile insurance policy to Bouton’s sister. In his petition, Bouton alleged that he was a permanent resident of his sister’s household at the time of the accident.
USAA opposed Bouton’s petition, asserting that the language of USAA’s policy expressly allowed arbitration only of two issues: (1) whether a “covered person” was entitled to recover damages from a third party and (2) the amount of the damages. In fact, the language of USAA’s policy expressly provided that any arbitration “shall not address … coverage questions.” USAA asserted that the issue of whether Bouton was a resident of his sister’s household was a coverage question, and that the issue could not be resolved through arbitration. The trial court agreed with USAA, and denied Bouton’s petition to compel arbitration.
Holding
The Court of Appeal reversed, holding that USAA could not contractually limit its arbitration provision to the issues of (1) the third party’s liability and (2) damages. California Insurance Code section 11580.2, which governs UM/UIM coverage provisions, requires arbitration of all disputes, including disputes regarding jurisdictional facts, such as whether a particular person qualifies as an insured.
Comment
This case reiterates the rule set forth in Van Tassel v. Superior Court (1974) 12 Cal.3d. 624, in which the California Supreme Court explicitly held that arbitrators in UM/UIM disputes have sole authority to decide whether a particular claimant qualifies as an insured. In fact, the Court of Appeal in this case actually held that jurisdictional facts in UM/UIM claims must be submitted to arbitration, and that contractual provisions to the contrary are unenforceable.