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COA: Parties must arbitrate dispute over insurance coverage

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The Indiana Court of Appeals found a trial court erred when it failed to enforce an arbitration provision of an insurance policy issued by Pekin Insurance Co. and ordered a couple’s lawsuit against their insurer stayed until arbitration is complete.

Carol and Jose Hanquiers sued Joseph Hall and Pekin Insurance Co. seeking damages from Hall stemming from an auto collision that injured Carol Hanquiers severely. The Hanquiers also sought underinsured motorist benefits from Pekin.

Pekin sought to arbitrate the dispute for underinsured motorist benefits based on a provision of the policy that says, “either party may make a written demand for arbitration” if the insurer and the insured don’t agree whether the insured can recover those damages. Pekin requested a stay pending arbitration.

The trial court denied Pekin’s requests, leading to this appeal.

In Pekin Insurance Company v. Jose and Carol Hanquier and Joseph Hall, 55A04-1208-CT-401, Pekin argued that the policy provides arbitration is mandatory when requested by either party; the Hanquiers took the position that the word “may” makes arbitration permissive and not mandatory.

“Under the policy, either Pekin or the insured ‘may’ make a demand for arbitration, but neither is required to make such a written demand. However, once either party makes a written demand for arbitration, arbitration becomes mandatory,” Judge James Kirsch wrote. He pointed to the use of “will” later in the section regarding arbitrator selection and coverage of costs.

The trial court should have enforced the arbitration provision as required by Indiana Code 34-57-2-3(a), the judges held, as well as granted the stay pending arbitration. The case is remanded for further proceedings.

 

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