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Denying a non-signatory insurance company's request to compel arbitration, a California federal court held that a non-signatory cannot compel arbitration when the claims against the non-signatory do not arise under the agreement containing the arbitration clause.
In Mundi v. Union Sec. Life Ins. Co., No. CV-F-06-1493 OWW/TAG, 2007 WL 1574871 (E.D. Cal. May 30, 2007), Mundi's husband had obtained a home equity line of credit from Wells Fargo. Wells Fargo offered life insurance designed to pay off the line of credit up to $50,000. Mundi's husband purchased the insurance and Mundi cosigned. A year later, Mundi's husband was murdered.
After Union Security Life Insurance Company (USLIC) refused to pay her claim, Mundi sued USLIC for Breach of Contract and Breach of the Implied Warranty of Good Faith and Fair Dealing. USLIC moved to compel arbitration pursuant to arbitration provisions in the Equity Line Agreement between Wells Fargo and Mundi's husband. USLIC was not a signatory to the Agreement.
The Court denied the motion to compel arbitration holding that a non-signatory cannot compel arbitration when the claims against the non-signatory do not arise from the agreement containing the arbitration clause. Although Mundi, the signatory, looked to her agreement with Wells Fargo to determine the amount owed by the insurance company, this did not signify that she relied on the agreement. Thus, USLIC could not use equitable estoppel to compel Mundi to arbitrate her claims.
Additionally, the EquityLine Agreement's terms limit arbitration to disputes between Wells Fargo and Mundi while explicitly precluding third parties from using the agreement. Moreover, USLIC failed to provide any evidence supporting its claim that it operated as Wells Fargo's agent. Further, Wells Fargo was not a party to the dispute. Finally, the dispute concerned the insurance policy rather than the loan. USLIC did not show a sufficient degree of relatedness or intertwining that would permit a non-signatory to compel arbitration against a signatory of an agreement containing an arbitration provision.
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