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Seventh Circuit: Affirms Decision Insurance Policy Does Not Require Arbitration (Web)

BCS Insurance Company v. Wellmark, Incorporated, D/B/A Blue Cross and Blue Shield of Iowa, 2005 WL 1324846 (7th Cir., June 1, 2005.)  The United States Court of Appeals for the Seventh Circuit affirmed the District Court’s decision to deny BCS’s motion to compel arbitration, holding that the “relation back” clause of the insurance policy was not enough to place a current claim under a previous insurance policy, and the current policy unambiguously calls for arbitration only at the option of the insured, which here chose to litigate. 
BCS provided Wellmark with errors-and-omissions insurance from 1994 through 1997.  This insurance covered claims made against and reported by Wellmark.  The 1994-1996 policies all contained mandatory arbitration clauses where as the 1997 clause contained an optional clause, stating “[a]ny controversy arising out of or relating to this Policy or the breach thereof shall, at the option of the Participant Insured, …be settled by binding arbitration.” 
Four class action lawsuits were filed in 1994, 1995, 1996, 1997, against Wellmark claiming “illegal profits based on undisclosed agreements it had with medical providers.”  All four claims were settled by Wellmark and reported to its insurer, BCS. 
BCS refused to honor the policy and Wellmark filed a lawsuit seeking performance.  BCS filed a motion to compel arbitration.  The District court decided the claims arising from 1994-96 should be settled through arbitration per BCS and Wellmark’s agreement and the 1997 claim should be litigated, based on Wellmark’s preference per the 1997 agreement.  BCS appealed. 
BCS asserted the 1997 claim was related to the 1994 claim under the “relation back” clause, and therefore the claims should be considered one and arbitration should be compelled.  The “relation back” clause states, “All claims based upon, arising out of, directly or indirectly resulting from, in consequence of, or in any way involving the same Wrongful Act or Interrelated Wrongful Acts shall be deemed to be a single Claim made at the time the earliest such Claim is made.”  The United States Court of Appeals for the Seventh Circuit held the “relation back” clause did not impact the arbitration clause.     The Court determined the 1997 claim arose under and was related to the 1997 policy.  The 1997 policy unambiguously stated arbitration was optional, therefore, Wellmark can’t be compelled to arbitrate.   The District Court’s decision was affirmed. 
This opinion can be found at: