Electronic Arbitration Agreement Never Shown to or Signed by Consumer is Unenforceable

The California Court of Appeal affirmed an order denying a motion to compel arbitration against a woman who never saw nor signed her agreement to arbitrate.

In Wilhelmi v. Health Net Life Insurance Co., No. B180232, 2006 WL 1545710 (Cal. Ct. App. June 7, 2006), Wilhelmi bought a health insurance policy from Health Net on the recommendation of her insurance agent. Wilhelmi never saw the insurance application because her agent completed the application by asking Wilhelmi the relevant questions and entering her responses into the computer. Wilhelmi never signed the application because, according to her agent, it was not possible to print the application.

Health Net approved the unsigned application and issued a policy to Wilhelmi despite the policy’s explicit language requiring the agreement to be signed “in blue or black ink.” A few months later, Wilhelmi received medical treatment costing approximately $148,900. Health Net refused to pay Wilhelmi’s medical bills on the ground that she failed to disclose prior knee surgery. Wilhelmi sued Health Net for withholding benefits, and Health Net moved to compel arbitration pursuant to an arbitration provision in the insurance policy.

The trial court denied Health Net’s motion to compel arbitration because there was no written agreement to arbitrate. Noting that Wilhelmi “cannot outwardly manifest assent to a provision she does not know exists,” the Court affirmed the trial court’s finding that there was no written agreement to arbitrate.

The Court applied the California Rules of Civil Procedure, which require that an agreement to arbitrate must be written. In this case, Wilhelmi never saw the contract and never received a written agreement. Unlike other cases where the user reads a “click-through” agreement on a computer, the insurance agent, not Wilhelmi, was at the computer, and Wilhelmi had no way of knowing what the terms were, or that a contract was being formed. See Christina L. Kunz, et. al., Click-Through Agreements: Strategies for Avoiding Disputes on Validity of Assent,

57 Bus. Law. 401 (2001).

Health Net argued that Wilhelmi manifested acceptance of the arbitration provision in the insurance policy by filing a claim under the policy and suing to enforce its benefits. In support of this argument, Health Net cited section 1589 of the California Code of Civil Procedure, which provides: “ A voluntary acceptance of the benefit of a transaction is equivalent to a consent to all the obligations arising from it,so far as the facts are known, or ought to be known, to the person accepting.” (Emphasis added).