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Dries v. OneBeacon America Insurance Co.

United States District Court, W.D. Wisconsin

February 25, 2016



WILLIAM M. CONLEY District Judge

On September 18, 2014, plaintiff Michael Dries was involved in a traffic accident and sustained multiple injuries. This lawsuit arises from defendant OneBeacon America Insurance Company’s (“OneBeacon”) alleged refusal to pay insurance benefits due Dries under an Occupational Accident Policy issued to FAF, Inc., the company for whom he was working as a truck owner-operator at the time of his accident.[1] Because that policy contains an arbitration provision, OneBeacon has moved to compel arbitration of Dries’s lawsuit and dismiss this case. (Dkt. #3.) Because the presumption in favor of arbitration controls here and the compelled arbitration should cover the parties’ entire dispute, the court will grant both motions, subject to reopening upon good cause shown.


Plaintiff Michael Dries is a resident of Sparta, Wisconsin. Defendant OneBeacon is a foreign insurance company with its state of incorporation and principal place of business both in the State of Pennsylvania. On April 1, 2010, OneBeacon issued an Occupational Accident Policy (“the Policy”) to FAF, Inc. The Policy provides coverage to owner- operators, including but not limited to an Accidental Medical Expense Benefit and a Temporary Total Disability Benefit.

The Policy was still effective when Dries was involved in an accident while driving his truck on Interstate 80. He suffered multiple injuries, including a lumbar burst fracture at L2 of the spine. Due to those injuries, he has been unable to work and has incurred substantial medical expenses.

On September 22, 2014, Dries provided a Claim Form - Occupational Accident, as an owner-operator under the Policy, to Brentwood Services, Administrators, Inc., one of OneBeacon’s third-party administrators. After OneBeacon declined to provide coverage to Dries, he brought this suit in state court, alleging this denial constituted a breach of the Policy. He also alleges a separate claim for bad faith, asserting that OneBeacon has no reasonable basis for refusing to provide Dries with benefits to cover his medical expenses and temporary total disability.

Dries attached the Policy to his complaint, making it “a part of the pleading for all purposes.” Fed.R.Civ.P. 10(c). In its Section VIII, entitled “Claims Provisions, ” the Policy includes a provision entitled “Arbitration.” That provision reads:

Any contest to a claim denial under this Policy will be settled by arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction. The arbitration will occur at the offices of the American Arbitration Association nearest to the Insured Person or the person claiming to be the beneficiary. The arbitrator(s) will not award consequential or punitive damages in any arbitration under this section. This provision does not apply if the Insured Person or the person claiming to be the beneficiary is a resident of a state where the law does not allow binding arbitration in an insurance policy, but only if this Policy is subject to its laws. In such a case, binding arbitration does not apply.
This Arbitration provision permanently bans the institution of any individual or class action lawsuit brought by the Insured Person or beneficiary. With this binding Arbitration provision, the Insured Person is waiving his or her right to a trial by jury.

(Policy (dkt. #1-2) 22 (emphasis in original).)


Under the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., this court must compel arbitration where: (1) a valid agreement to arbitrate exists; (2) the dispute falls within the scope of that agreement; and (3) plaintiff has refused to proceed to arbitration in accordance with the arbitration agreement.[2] Zurich Am. Ins. Co. v. Watts Indus., 466 F.3d 577, 580 (7th Cir. 2006); Ineman v. Kohl’s Corp., No. 14-cv-398-wmc, 2015 WL 1399052, at *3 (W.D. Wis. Mar. 26, 2015). As already alluded to, the FAA also established a presumption in favor of arbitration, meaning that “questions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration.” Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). Thus, “as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.” Id. at 24-25.

The central point of contention with respect to the question of arbitration here is whether Dries’s claims fall within the scope of the Policy’s arbitration provision. Dries concedes that his breach of contract claim constitutes a “contest to a claim denial” and is, therefore, subject to the Policy’s arbitration provision. He argues, however, that his bad faith tort claim is not a “contest to a claim denial” and falls outside the scope of the agreement to arbitrate. This much is surely correct under Wisconsin law. Indeed, the Wisconsin Supreme Court has explicitly recognized a tort claim for bad faith in the insurance context is independent of any underlying breach of contract. Jones v. Secura Ins. Co., 2002 WI 11, ¶ 11, 249 Wis.2d 623, 638 N.W.2d 575 (citing Anderson v. Cont’l Ins. Co., 85 Wis.2d 675, 696, 271 N.W.2d 368 (1978)). “[B]ad faith is an intentional tort and . . . a bad faith action may ‘result in not only compensatory damages, but also punitive damages and damages for emotional injury.’” Id. at ¶ 14 (quoting Anderson, 85 Wis.2d at 694). “If an insured successfully proves that the insurer intentionally denied a claim without a reasonable basis, the insured is entitled to recover all damages [that] are the proximate result of the insurer’s bad faith.” Id. at ¶ 37.

Thus, Dries contends that his claim for breach of contract is meaningfully distinct from his claim for bad faith, with the former focusing on his contractual rights under the Policy and the latter on the intentional, tortious acts of the insurer. Dries also contends that the differences in damages available demonstrate that a bad faith claim is something “more than a contest to a claim denial.” (Pl.’s Br. Opp’n (dkt. #8) 4 (emphasis in original).) As OneBeacon points out, however, a party may not avoid arbitration by casting its complaint in terms of tort rather than contract, Sweet Dreams Unlimited, Inc. v. Dial-A-Mattress International, Ltd., 1 F.3d 639, 643 (7th Cir. 1993), and when multiple claims ...

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