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Citing the "extremely broad" language of the arbitration agreement and the policy of resolving any ambiguities in favor of arbitration, a federal court in Illinois ruled that a dispute over a purported settlement agreement fell within the scope of the parties' arbitration agreement.
In Trustmark Insurance Co. v. Transamerica Occidental Life Insurance Co., No. 06-C-5561, 2007 WL 1266070 (N.D. Ill. May 1, 2007), Trustmark Insurance (Trustmark) and Transamerica entered into an agreement whereby Transamerica would provide administrative services to Trustmark and another insurance company. The agreement contained a broadly worded arbitration clause.
When a dispute arose, Trustmark agreed to pay $270,000 to resolve the dispute. However, Transamerica subsequently withdrew its offer to settle for that amount when it discovered a miscalculation underlying the settlement offer.
Trustmark brought suit to enforce the alleged settlement agreement. In response, Transamerica filed a motion to compel arbitration of the dispute.
In ruling on the motion, the Court first looked to the plain language of the arbitration agreement. As the Court noted, an agreement to arbitrate "all disputes… related to" the agreement is construed to be "extremely broad" even without the oft-accompanying phrase "arising out of."
Where an arbitration agreement is broadly worded and contains no applicable exemption or exclusion, an issue is presumed to fall within the scope of the agreement. The Court found no applicable exclusion in the agreement.
In light of the broad language of the agreement and the policy of resolving ambiguities in favor of arbitration, the Court ordered the parties to arbitrate the dispute over the validity of the purported settlement agreement.
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