Clark v. Am. Mem'l Life Ins. Co.

MEMORANDUM OPINION AND ORDER

JOSEPH R. GOODWIN UNITED STATES DISTRICT JUDGE

Pending before the Court is Defendant American Memorial Life Insurance Company's (“AMLIC”) Motion to Compel Arbitration and Stay the Proceedings. [ECF No. 16]. For reasons explained herein, the motion is GRANTED.

I. Background

This matter arises from a dispute over the denial of benefits claimed under a life insurance policy issued to the decedent, Robert D. Clark, Jr. See generally [ECF No. 1-1]. On May 30, 2019, Defendant David A. Norfleet, an agent of AMLIC, approached Mr. Clark at his home to discuss the purchase of a life insurance policy covering Mr. Clark, then age 70. Id. at 7. Mr. Clark completed an application for a $15, 000 whole life insurance policy with Mr. Norfleet's assistance. [ECF No. 16-1, at 16-18]. The application asked biographical questions about Mr. Clark, listed some terms of the proposed insurance policy, and contained authorizations for AMLIC to

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acquire Mr. Clark's medical records and to withdraw premium payments from Mr. Clark's bank account. Id. at 14-18.

After completing and signing the application, Mr. Clark received a form insurance policy from AMLIC on June 15, 2019. [ECF No. 17, at 2]. This policy contained significantly more terms and details than the application. See generally [ECF No. 16-1, at 2-12]. Listed on the front page of the policy was the statement:

READ YOUR POLICY CAREFULLY

THIS POLICY IS A LEGAL CONTRACT BETWEEN YOU AND US.

[ECF No. 16-1, at 2] (emphasis in original). The front page further stated, “This policy is issued in consideration of the application and payment of the first premium before delivery of this policy.” Id. Also listed on the front of the policy was Mr. Clark's “Right to Cancel.” Id. (emphasis in original). This section explained that Mr. Clark could “cancel this policy” by returning it by mail to AMLIC within 30 days of receipt. Id. AMLIC would “then refund all premiums paid.” Id.

Within the “General Provisions” section of the policy was a provision that stated “Arbitration - Any issue(s) that may arise between the parties to this policy shall be submitted to mandatory binding arbitration where permitted by law.” Id. at 9 (emphasis in original). After receiving the policy, Mr. Clark did not exercise his right to cancel and instead paid the monthly premiums required by AMLIC until his death on January 20, 2021. [ECF No. 1-1, at 8]. AMLIC subsequently refused to pay out the $15, 000 policy amount. Id. at 4.

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Sherman Clark, as the Executor of Mr. Clark's Estate, and Amanda Clark, as the primary beneficiary of the life insurance policy (“Plaintiffs”), filed suit in the Circuit Court of Kanawha County on June 10, 2021, alleging three claims against AMLIC: (1) violation of the West Virginia Unfair Trade Practices Act and first party bad faith, (2) fraud and misrepresentation, and (3) breach of contract. Id. at 4, 8, 1216. AMLIC filed its Notice of Removal on July 14, 2021. See generally id.^[1] Due to stipulations between the parties, AMLIC has yet to serve a responsive pleading to Plaintiffs. [ECF Nos. 4, 6].

After AMLIC's counsel received the insurance policy between it and Mr. Clark, [ECF No. 24-3], AMLIC filed the instant Motion to Compel Arbitration and Stay the Proceedings with an accompanying memorandum of law on September 9, 2021, arguing that there is a valid, enforceable arbitration agreement governing the dispute. [ECF Nos. 16, 17]. Plaintiffs responded on September 23, 2021, arguing that there was no enforceable arbitration agreement between Mr. Clark and AMLIC. [ECF No. 24]. Alternatively, Plaintiffs argue the arbitration provision is invalid because it is substantively and procedurally unconscionable. Id.

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II. Legal Standard

The Federal Arbitration Act (“FAA”) provides that written arbitration agreements involving interstate commerce “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The FAA embodies “a congressional declaration of a liberal federal policy favoring arbitration agreements” and “create[s] a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act.” Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). A court must give “due regard” to this federal policy favoring arbitration and should resolve “ambiguities as to the scope of the arbitration clause itself in favor of arbitration.” Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ., 489 U.S. 468, 476 (1989).

In the Fourth Circuit, a party seeking to compel arbitration under the FAA must establish four elements:

(1) the existence of a dispute between the parties, (2) a written agreement that includes an arbitration provision which purports to cover the dispute, (3) the relationship of the transaction, which is evidenced by the agreement, to interstate or foreign commerce, and (4) the failure, neglect or refusal of the [nonmoving party] to arbitrate the dispute

Adkins v. Labor Ready, Inc., 303 F.3d 496, 500-01 (4th Cir. 2002) (quoting Whiteside v. Teltech Corp., 940 F.2d 99, 102 (4th Cir. 1991)). Whether a party agreed to arbitrate a particular dispute is a question of state law governing contract formation. Adkins, 303 F.3d at 501.

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If a court determines that an arbitration agreement is governed by the FAA, it must enforce the agreement and stay any suit or proceeding pending arbitration of any issue “referable to arbitration under such an agreement.” 9 U.S.C. § 3. This provision is mandatory; a district court “has no choice but to grant a motion to compel arbitration where a valid arbitration agreement exists and the issues in a case fall within its purview.” Adkins, 303 F.3d at 500.

III. Discussion

AMLIC argues that Plaintiffs must settle their dispute with AMLIC through arbitration, pursuant to the terms of Mr. Clark's life insurance policy. [ECF No. 16]. Plaintiffs allege that Mr. Clark never agreed to arbitrate any dispute with AMLIC because the purported agreement lacked mutual assent and consideration. [ECF No. 24, at 1-4]. Accordingly, with Plaintiffs' arguments directed at the second Adkins element regarding the existence of a written agreement, the first, third, and fourth elements are not in dispute.^[2] As the arbitration provision purports to cover “[a]ny issue(s) that may arise between the parties[, ]” the only inquiry remaining for the Court is whether the arbitration agreement is valid under West Virginia law governing contract formation. See Whiteside v. Teltech Corp., 940 F.2d 99, 102 (4th Cir. 1991) (“When deciding arbitrability, the court only determines whether, as a

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matter of contract between the parties, the underlying dispute should be resolved in court or by arbitration.”).

Under West Virginia law, an insurance contract, like other contracts, “is an offer and acceptance supported by consideration.” Keller v. First Nat'l Bank, 403 S.E.2d 424, 427 n.5 (W.Va. 1991) (internal citations omitted). “The application for insurance is the offer,...