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A federal district court in California ordered arbitration of a University of California student's claim that he was wrongly denied benefits under a Student Health Insurance Plan (SHIP).
In Fredrickson v. Regents of University of California, No. C 06-03335 JSW, 2006 WL 3499243 (N.D. Cal. Dec. 4, 2006), Fredrickson, a male to female transsexual, filed suit, alleging that the university and her health insurance company violated her rights by denying coverage for "[p]rocedures or treatments to change characteristics of the body to those of the opposite sex."
The health insurance company filed a motion to compel arbitration. In opposing the motion, Fredrickson argued that the arbitration agreement was unconscionable and therefore unenforceable. The Court granted the motion because it found no evidence of procedural or substantive unconscionability.
California employs a "sliding scale" approach to unconscionability, whereby a minimal showing of procedural unfairness may be supplemented by a weighty showing of substantive unfairness and vice versa. However, in examining the arbitration clause in the SHIP agreement, the Court could not identify any significant indicia of unconscionability.
First, Fredrickson had the option of selecting alternative health insurance, indicating that the agreement was not negotiated on a "take-it-or-leave-it basis." Second, Fredrickson's alleged "lack of bargaining power" was irrelevant in the group medical insurance context, where an agent with "significant bargaining strength" actually negotiates on behalf of the group. Finally, the Court rejected Fredrickson's argument that the costs of arbitration were prohibitive, since the insurer agreed to absorb all but $125 of the arbitration fees.
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