RPNA attorneys Nicholas Roxborough, Joseph Gjonola and Ryan Salsig won a victory for California workers’ comp policyholders with the recent court decision stating Applied Underwriters, a subsidiary of Berkshire Hathaway, can’t enforce the arbitration provision in side agreements that were not filed with the Workers’ Compensation Insurance Rating Bureau (WCIRB).
What makes this March 16 decision in RPNA’s case Luxor Cabs v. Applied Underwriters Captive Risk Assurance Company significant is that it’s the first decision in a California court to state expressly it is the court, not arbitrators, who will decide whether or not arbitration clauses are enforceable. It is also the first California decision to state expressly that arbitration clauses are void and unenforceable when the underlying agreements have not been filed with the WCIRB, an issue being litigated in many other jurisdictions across the country.
“Policyholders now have a legal path to invalidate unlawful arbitration clauses so they can confront their workers’ comp insurers in court.”
“This decision will impact California workers’ comp policyholders who have struggled to find justice in a court of law due to arbitration clauses found in insurance carriers’ unapproved ‘side agreements,’” says Roxborough. “Policyholders now have a legal path to invalidate unlawful arbitration clauses so they can confront their workers’ comp insurers in court.”
California Superior Court Judge Harold Khan ruled the arbitration clause found in the reinsurance participation agreement (RPA), part of Applied Underwriter’s EquityComp program, is void and unenforceable in California since the RPA was not filed with the Workers’ Compensation Insurance Rating Bureau (WCIRB). It’s another in the latest series of rulings against the Berkshire Hathaway subsidiary.
“It was pretty much a foregone conclusion that Applied’s arbitration agreement was void as a matter of law; Applied didn’t even argue that the agreement was not void,” explains Salsig. “The only real issue in the motion was whether the court or an arbitrator was required to declare it void.”
In this case, RPNA made a specific challenge to the delegation clause contained in Applied’s underlying side agreements. And, Judge Khan went on to find the arbitration provisions to be unenforceable.
“Our clients are grateful that Judge Kahn recognized the unique nature of delegation clauses in these agreements,” adds Gjonola. “Judge Kahn correctly ruled that when the delegation clause is severed from the underlying RPA, it stands in violation of Insurance Code §11658. Therefore the court, rather than arbitrators who tend to favor insurance companies, must decide the validity of the arbitration clause, which Judge Kahn also found void and unenforceable under the FAA.”
Roxborough went on to note that this ruling continues a long succession of opinions, from the Department of Insurance to State and Federal courts throughout California, that unfiled arbitration provisions that ignore the statutory rules of Insurance Code § 11658 are void and unenforceable as a matter of law.
If you have any questions regarding this decision, please contact us at (818) 992-9999 or via email.