The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court
(1) GRANTING DEFENDANT'S MOTION TO COMPEL BINDING ARBITRATION; and (2) STAYING THE LITIGATION
This diversity action stems from Defendant Lexington Insurance Company's denial of Plaintiff AG La Mesa's insurance claim. Presently before the Court is a Motion to Compel Binding Arbitration and to Dismiss or, in the Alternative, Stay the Litigation brought by Defendant.In consideration of the parties' briefs, oral argument, and for the reasons discussed herein, the Court GRANTS Defendant's motion and stays the litigation.
Defendant issued an employment practices liability insurance policy to Plaintiff with a period of October 1, 2009 to October 1, 2010. (See Def.'s Mot. at 3; Pl.'s Opp. at 2.) The Policy contains an arbitration clause that requires arbitration of "a disagreement as to the interpretation of this policy." (Def.'s Mot. at 3; Pl.'s Opp. at 8.)
On January 25, 2010, a former employee of Plaintiff, Linda Maire, sued Plaintiff for various employment-related violations and practices on behalf of herself and other putative class members. (Def.'s Mot. at 4; Pl.'s Opp. at 2.) Three days later, on January 28, 2010, Plainitff's broker notified Defendant of the Maire lawsuit and asked it to provide a defense. Defendant denied the claim on February 3, 2010. (Def.'s Mot. at 5; Pl.'s Opp. at 2.) Plaintiff asked Defendant to reconsider its denial twice, and in both instances, Defendant affirmed its denial of coverage. (Def.'s Mot. at 5; Pl.'s Opp. at 3.) In both instances, Defendant affirmed its denial without mentioning arbitration and instructed Plaintiff to contact the California Department of Insurance ("DOI") if it disagreed with the denial. (See Def.'s Mot. at 5; Pl.'s Opp. at 3.)
On August 3, 2010, Plaintiff filed a complaint in Superior Court against Defendant for breach of the implied covenant of good faith and fair dealing and breach of contract. (See Doc. No. 1.) Defendant removed the case to this Court on September 8, 2010. (Id.) Prior to removal, on August 26, 2010, Defendant invoked the policy's arbitration clause and demanded that Plaintiff agree to arbitrate in Massachusetts. (See Def.'s Mot. at 6; Pl.'s Opp. at 3.) Plaintiff denied Defendant's demand on September 2, 2010. (Def.'s Mot. at 6; Pl.'s Opp. at 3.) After Plaintiff rejected arbitration in Massachusetts, Defendant demanded arbitration in California pursuant to a letter dated September 21, 2010. (Def.'s Mot. at 6; Pl.'s Opp. at 3.) Plaintiff denied Defendant's second demand on September 27, 2010. (Def.'s Mot. at 6.)
Defendant filed the present motion on October 14, 2010. (Doc. No. 8.) Plaintiff filed an opposition and Defendant filed a reply. (Doc. Nos. 10, 11.)
I. Scope of the Insurance Policy's Arbitration Clause
"The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration . . ." Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983). At the same time, arbitration "is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." AT&T Tech., Inc. v. Communications Workers of America, 475 U.S. 643, 648 (1986) (quoting Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960). In this case, the Maire lawsuit has generated a dispute over coverage, and the parties disagree as to whether the arbitration clause in the Policy requires the parties to resolve the dispute through binding arbitration. For purposes of the present motion, the question is whether a coverage dispute constitutes a "disagreement as to the interpretation of this policy."*fn1
Defendant maintains that "all of Plaintiff's claims derive from the interpretation and application of the policy provisions, including amendments, endorsements, and exclusions thereto. Specifically, the parties' coverage positions differ with respect to the application of the Insuring Agreement, Endorsement #012, 'Revised Workplace Torts,' and Exclusion H, Wage claims." Def.'s Reply at 7. Defendant argues further that "resolution of the disagreement over interpretation of the policy would involve an analysis of the Maire lawsuit pursuant to the terms of the policy in its entirety." Id.
Plaintiff responds that the arbitration clause is narrow and does not encompass any and all disputes arising out of the policy. Pl.'s Opp. at 8-9.According to Plaintiff, policy interpretation consists only in ascertaining the meaning of the parties' expression, and that under California law, an arbitrator tasked with ascertaining the meaning of the parties' expression would only look to the four corners of the policy (unless extrinsic evidence were necessary to explain an ambiguity). Id. at 9. It follows, Plaintiff argues, that an arbitrator would not be permitted to analyze the Maire complaint to see if it was covered by the policy. Id. Plaintiff relies principally on Certain Underwriters at Lloyd's of London v. Celebrity, Inc., ...