E+B Secures Significant Ruling Concerning Arbitration Provision

On February 17, 2023, the United States District Court for the Northern District of Texas ordered arbitration of all claims asserted by an insured against its four insurers. The insurers provided commercial property coverage to the insured’s condominium complex pursuant to an insurance program to which all four insurers contributed policy forms and endorsements. One of the insurers contributed an arbitration clause endorsement. The policy forms and endorsements of the other three insurers did not contain an arbitration clause.

Eggleston & Briscoe argued on behalf of the insurers, and the Court agreed, that all the parties entered one overarching contract which required arbitration of the dispute. The insured argued that, at most, only the claims against the insurer with the arbitration clause endorsement should be ordered to arbitration.

The court disagreed and ordered all claims to arbitration upon the insurers’ motion, finding that pursuant to rules of contract interpretation the arbitration clause endorsement is part of an insurance policy that constitutes a contract between the insured, on the one hand, and the four insurers, on the other. The Court found that this result is supported also by equitable principles – specifically, the “intertwined-claims test” formulated by the Eleventh Circuit, which the Fifth Circuit applies where “(1) a nonsignatory has a close relationship with one of the signatories and (2) the claims are intimately founded in and intertwined with the underlying contract obligations.”

The opinion is Signal Ridge Owners Ass’n, Inc. v. Landmark Am. Ins. Co., No. 3:22-CV-1385-D, 2023 WL 2090994, at *6 (N.D. Tex. Feb. 17, 2023).