Because courts apply a presumption of arbitrability when they analyze whether particular claims fall within the scope of an arbitration clause, and arbitration clauses are generally drafted very broadly, I don’t usually get to write about courts finding that a dispute falls outside the scope of arbitrable claims.  But this week, both the Second and Third Circuits issued decisions holding that defendants could not compel arbitration because the plaintiffs’ claims fell outside the arbitration clause.

In Allstate Ins. Co. v. Mun, 2014 WL 1776007 (2d Cir. May 6, 2014), Allstate alleged that two New York providers had engaged in insurance fraud.  Allstate had already paid the providers for their services, and sought to recover those payments.  After Allstate sued, the providers moved to compel arbitration.  The district court denied the motion and the Second Circuit affirmed that decision.  Both courts found that the arbitration provision, although “appear[ing] quite broad,” only applied to disputes over claims for first-party benefits (i.e. the providers’ initial request for payment).  The courts reached that conclusion in part because of its interpretation of aspects of New York’s no-fault insurance statutes, which had been interpreted to require arbitration only of first party claims..

In CardioNet, Inc. v. Cigna Health Corp., 2014 WL 1778149 (3d Cir. May 6, 2014), medical device providers sued CIGNA for its decision not to pay for services related to those devices (after it had covered such services for four years).  The device company had brought two types of claims: 1) direct tort claims relating to a letter that CIGNA sent to doctors calling the devices experimental and unproven; and 2) derivative claims on behalf of individual insureds under ERISA.  CIGNA moved to compel arbitration.  The district court granted the motion, but the appellate court vacated that decision, finding both categories of claims fell outside the scope of the parties’ arbitration agreement.

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