Mission Viejo Emergency Medical Associates v. Beta Healthcare Group
197 Cal. App. 4th 1146
| Cal. Ct. App. | 2011Background
- MVEMA and 12 physician-partners sue HealthProviders Insurance Reciprocal (HealthPro) and Beta for breach of good faith and fair dealing, breach of contract, and intentional and negligent infliction of emotional distress.
- HealthPro issued professional liability policies to MVEMA from 2002 through 2004, all containing an arbitration provision titled Arbitration of Disputes with Us.
- The 2004 arbitration clause states disputes will be arbitrated in San Francisco under California law, with a neutral arbitrator, cost sharing, and nonreviewability of HealthPro discretionary decisions.
- Plaintiffs claim the arbitration clause was never disclosed in policy applications; MVEMA’s managing partner testified he was unaware of arbitration until suit was filed.
- The trial court denied arbitration, finding the clause unenforceable due to nondisclosure; the court remanded to determine enforceability later.
- The court of appeal reverses, holds the arbitration clause is clear, conspicuous, and enforceable, and directs the trial court to grant the motion to compel arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the arbitration clause is enforceable despite nondisclosure in applications | MVEMA argues lack of consent due to no disclosure. | Clause is part of a valid policy and thus enforceable. | Arbitration provision enforceable; disclosure in application not required. |
| Whether the contract language constitutes a valid agreement to arbitrate | Policy terms were not read or consented to by MVEMA. | Consent is evidenced by acceptance of policy benefits and policy language. | Prima facie evidence of agreement exists; insured bound by policy terms. |
| Whether 2004 changes to the arbitration clause affect enforceability | Renewal changes undermine binding effect; not adequately noticed. | Policy language itself provides notice; changes do not void enforceability. | Changes do not render clause unenforceable; earlier version can apply or be severed if needed. |
| Whether the arbitration clause is unconscionable | Procedural or substantive unconscionability due to terms like San Francisco venue and cost split. | Clause is conspicuous and not substantively unconscionable; can sever terms if necessary. | Arbitration clause is not unconscionable; enforceable. |
Key Cases Cited
- Rosenthal v. Great Western Fin. Securities Corp., 14 Cal.4th 394 (Cal. Supreme Court 1996) (burden to prove existence of arbitration agreement by preponderance; prima facie evidence sufficient)
- Hotels Nevada v. L.A. Pacific Center, Inc., 144 Cal.App.4th 754 (Cal. App. 2d Dist. 2006) (enforceability determined as with other contracts; hearing procedures under Rosenthal)
- Haynes v. Farmers Ins. Exchange, 32 Cal.4th 1198 (Cal. Supreme Court 2004) (conspicuousness requirement for unusual or unfair language; arbitration not per se unusual)
- Fields v. Blue Shield of California, 163 Cal.App.3d 570 (Cal. App. 2d Dist. 1985) (insured bound by clear and conspicuous policy provisions even if not read)
- Hadland v. NN Investors Life Ins. Co., 24 Cal.App.4th 1578 (Cal. App. 4th Dist. 1994) (policy terms control; agent statements not binding if not in conflict with policy)
- Hackethal v. National Casualty Co., 189 Cal.App.3d 1102 (Cal. App. 2d Dist. 1987) (promotional statements not binding when not in conflict with policy terms)
- Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (Cal. Supreme Court 2000) (arbitration agreements must be voluntary and enforceable under unconscionability standards)
- Engalla v. Permanente Medical Group, Inc., 15 Cal.4th 951 (Cal. Supreme Court 1997) (unconscionability standard and burden on party challenging arbitration)
- Chase v. Blue Cross of California, 42 Cal.App.4th 1142 (Cal. App. 4th Dist. 1996) (insured bound by policy terms; duty to read not always required)
- 24 Hour Fitness, Inc. v. Superior Court, 66 Cal.App.4th 1199 (Cal. App. 4th Dist. 1998) (substantive vs. procedural unconscionability; severability considerations)
- Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc., 109 Cal.App.4th 944 (Cal. App. 4th Dist. 2003) (objective theory of contract interpretation)