457 F.Supp.3d 1351
S.D. Fla.2020Background
- APIC issued a professional-liability policy to insured Dr. Anthony Batillo; policy limits $1,000,000 per incident.
- Plaintiff (Gomez) underwent chiropractic treatment by Batillo, suffered an arterial dissection and ischemic stroke, and obtained a final judgment (≈ $3.7M) against Batillo.
- Gomez sued APIC in Florida state court for third-party common-law bad faith, alleging APIC failed to timely tender policy limits; APIC removed to federal court.
- The policy contains an arbitration clause requiring disputes to be arbitrated in Orange County, California under the AAA and the FAA.
- APIC moved to compel arbitration, arguing Gomez — a non-signatory third-party beneficiary/judgment creditor — is bound by the clause via estoppel/agency principles; Gomez argued no assignment, clause excludes third parties, clause ambiguous as to notice, and APIC waived arbitration.
- The district court granted the motion: compelled arbitration, found Gomez bound as a third-party beneficiary under equitable estoppel/agency principles, found the clause valid and the dispute arbitrable, and held APIC did not waive arbitration; case administratively closed and stayed pending arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Gomez (non-signatory) is bound by the policy arbitration clause | Gomez is not a party, received no assignment, clause applies only to a "party or that party's authorized representative," so he cannot be compelled | Gomez is a third-party beneficiary and/or estopped from accepting policy benefits while avoiding its arbitration requirement; non-signatories can be bound under equitable estoppel/agency doctrines | Held: Gomez is bound — third-party beneficiary/equitable estoppel and agency principles permit compelling arbitration |
| Whether the arbitration provision is valid or ambiguous (notice requirement) | The clause is ambiguous because it references "notice as herein provided," and the policy's notice provision appears to impose a deadline, so APIC failed to comply | The notice provision cited applies only to notices by the named insured reporting suits; no fixed deadline to demand arbitration applies and the arbitration clause is not ambiguous | Held: Arbitration provision is valid and not ambiguous; a "reasonable" notice (not a fixed earlier deadline) governs and arbitration deadline (submit within 15 days after demand) is enforceable |
| Whether an arbitrable issue exists (including whether California arbitrator can apply Florida bad-faith law) | Gomez contends California courts do not recognize third-party bad-faith claims, implying arbitrability problems | APIC points to the clause’s broad scope (disputes regarding policy terms or performance) and precedent arbitrating Florida disputes in California under same clause | Held: The dispute is arbitrable under the clause; arbitrator can hear the Florida bad-faith claim in California |
| Whether APIC waived the right to arbitrate | Gomez contends APIC delayed and failed to timely demand arbitration (pre- and post-suit correspondence and service dates) and thus waived the right | APIC filed arbitration-related defenses early, discussed arbitration with counsel promptly, and moved to compel within timelines consistent with FAA; any delay was not prejudicial | Held: APIC did not waive arbitration — it did not act inconsistently with the right nor cause prejudice to Gomez |
Key Cases Cited
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (enforcement presumption and federal policy favoring arbitration)
- Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (federal policy resolving doubts about arbitrability in favor of arbitration)
- Outokumpu Stainless USA, LLC v. Converteam SAS, 902 F.3d 1316 (11th Cir.) (nonsignatories can be compelled to arbitrate via estoppel under the FAA)
- Kong v. Allied Prof’l Ins. Co., 750 F.3d 1295 (11th Cir.) (Florida courts’ willingness to bind nonsignatories, including third-party beneficiaries, to arbitration clauses)
- Allied Prof’s Ins. Co. v. Fitzpatrick, 169 So. 3d 138 (Fla. 4th DCA) (third-party plaintiffs who claim benefits under a policy can be estopped from avoiding its arbitration clause)
- Laizure v. Avante at Leesburg, Inc., 109 So. 3d 752 (Fla.) (derivative nature of certain claims binds heirs/representatives to decedent’s arbitration agreement)
- Emp’rs Ins. of Wausau v. Bright Metal Specialties, Inc., 251 F.3d 1316 (11th Cir.) (federal law enforces arbitration agreements; state law governs formation/interpretation)