1. Appeal and Error_appealability_denial of arbitration_substantial
right_immediately appealable
An order denying arbitration is immediately appealable.
2. Arbitration and Mediation_arbitration clause_inclusive reading
A dispute about the cancellation of an insurance policy fell within the very broad
arbitration clause of the policy and must be submitted to an arbitrator for resolution. The trial
court erred by giving the policy a narrow reading; the court should grant a motion to arbitrate
unless it can be said with confident authority that the arbitration clause cannot be read to include
the asserted dispute.
3. Appeal and Error_alternative basis to support ruling_cross-assignment of error
required
An argument that an arbitration agreement was unconscionable was not properly before
the appellate court where plaintiff did not make a cross-assignment of error to present an
alternative basis for supporting the trial court's order denying arbitration.
Pell & Pell, L.L.P., by Gerald A. Pell, for plaintiff-
appellee.
Nexsen Pruet Adams Kleemeier, PLLC, by J. Scott Hale; and
Cole, Schotz, Meisel, Forman & Leonard, by Michael Stingone,
for defendants-appellants.
STEELMAN, Judge.
Defendants-appellants, Lumbermens Mutual Casualty Co.,
American Protection Insurance Co., and Kemper Casualty Insurance
Co. (collectively known as “Kemper”) appeal the trial court'sorder granting partial summary judgment in favor of plaintiff,
Hobbs Staffing Services, and denying their motion to compel
arbitration.
Plaintiff is a staffing organization, which provides temporary
employees for other businesses. Plaintiff is incorporated in
Tennessee, and has a principal place of business in Guilford
County, North Carolina. Defendants are Illinois corporations, in
the business of providing insurance coverage. On 15 October 2002,
plaintiff and defendants entered into an Insurance Program
Agreement (IPA), under the terms of which defendants agreed to
provide workers' compensation insurance coverage for plaintiff's
employees in North Carolina, Florida, Virginia, and Tennessee.
This agreement became effective on 30 September 2002 and contained
an arbitration clause. Defendants required plaintiffs to sign and
return the IPA within thirty days. The IPA was a pre-printed form
prepared by Kemper. Plaintiff's check for the first payment due
under the IPA was returned for insufficient funds.
On 5 December 2002, defendants sent plaintiff an email
threatening to cancel defendants' insurance. The email stated:
“Per our conversation, we are sending out notice of cancellation
tomorrow (12/6/2002) for non payment. The effective date of our
cancellation will be 12/19. That is 10 days with 3 days mailing
time.” On 17 December 2002 plaintiff received the formal notice
of cancellation from defendants, setting an effective date of
cancellation as 27 December 2002. On that same day, plaintiff had
Bank of America wire the full amount of all premiums then due, plusthe lost escrow deposit to defendants. Defendant received and
accepted the wire transfer.
As of 27 December 2002, defendants treated the policy as
cancelled and refused to reinstate coverage. Plaintiff filed suit,
seeking a preliminary injunction, as well as asserting that the
cancellation of its workers' compensation and employers liability
insurance coverage was ineffective. On 15 May 2003, the trial
court denied plaintiff's motion for preliminary injunction. The
next day plaintiff filed a motion for partial summary judgment. On
17 June 2003, defendants filed a motion to dismiss pursuant to Rule
12(b)(1) based on the arbitration clause, and under Rule 12(b)(6)
for failure to state a claim upon which relief could be granted.
In the alternative, defendants requested that the action be stayed
pending arbitration. The trial court granted plaintiff's motion
for partial summary judgment and denied defendants' motion to
compel arbitration. Defendants appeal.
[1] In defendants' first assignment of error, they contend the
trial court erred in finding the arbitration agreement was not
applicable to the dispute between the parties and denying their
motion to compel arbitration.
Initially, we note defendants' appeal is from an interlocutory
order. Generally, no right to appeal an interlocutory order
exists, except where the trial court's decision deprives the
appellant of a substantial right which would be lost absent
immediate review. Boynton v. ESC Med. Sys., Inc., 152 N.C. App.
103, 105-06, 566 S.E.2d 730, 731 (2002). This Court has held
“'[t]he right to arbitrate a claim is a substantial right which maybe lost if review is delayed, and an order denying arbitration is
therefore immediately appealable.'” Id. at 106, 566 S.E.2d at 732
(citations omitted).
[2] Whether a dispute is subject to arbitration is an issue
for judicial determination. Id. The trial court's conclusion
that a particular dispute is or is not subject to arbitration is a
conclusion of law, and is reviewable by the appellate courts de
novo. Sloan Fin. Grp., Inc. v. Beckett, 159 N.C. App. 470, 478,
583 S.E.2d 325, 330 (2003), aff'd per curium, 358 N.C. 146, 593
S.E.2d 583 (2004).
Whether a dispute is subject to arbitration involves a two-
part inquiry: “(1) whether the parties had a valid agreement to
arbitrate, and also (2) whether 'the specific dispute falls within
the substantive scope of that agreement.'” Id. (citations
omitted).
In its order, the trial court held that “the matters alleged
in this action do not come within the scope of the parties'
arbitration agreement,” and denied defendants' motions to dismiss
based on the arbitration clause, or in the alternative, to stay the
action pending arbitration. In order to ascertain whether a
dispute falls within the scope of the arbitration agreement, “we
must look at the language in the agreement, viz., the arbitration
clause[.]” Rodgers Builders v. McQueen, 76 N.C. App. 16, 23-24,
331 S.E.2d 726, 731 (1985). A presumption in favor of arbitration
exists. Sloan, 159 N.C. App. at 479, 583 S.E.2d at 331. Any
doubts regarding the scope of arbitrable issues should be resolved
in favor of arbitration. Id. at 477, 583 S.E.2d at 329. In the instant case, the relevant portion of the arbitration
clause is as follows:
A. Submission to Arbitration: _ In the event
of any dispute between Kemper and the Insured
with reference to the interpretation,
application, formation, enforcement or
validity of this Agreement or any other
agreement between them, or their rights with
respect to any transaction involved, whether
such dispute arises before or after
termination of this Agreement, such a dispute
. . . shall be submitted to the decision of a
board of arbitration . . . .
B. Sole Remedy: _ The parties agree that
arbitration pursuant to the terms of this
Article is the sole remedy for the resolution
of disputes between them under this Agreement
or any other agreement between them.
Unless it can be said with confident authority that the
arbitration clause cannot be read to include the asserted dispute,
the court should grant a parties' motion to arbitrate the
particular grievance. Id. (citing United Steelworkers v. Warrior
& G. Nav. Co., 363 U.S. 574, 582-83, 4 L. Ed. 2d 1409, 1417
(1960)). In the instant case, the arbitration clause is written
very broadly. The agreement requires that “any dispute” with
reference to the “interpretation, application, foundation,
enforcement or validity” of the agreement, or any “transaction
involved, whether such dispute arises before or after termination
of [the] Agreement” shall be submitted to arbitration. A dispute
involving the cancellation of a policy for non-compliance with its
terms falls within the covered areas of interpretation,
application, enforcement, or a transaction. We decline to adopt
the trial court's narrow reading of the policy, as it is contrary
to the principles of construction previously enunciated by ourappellate courts as noted above. This matter must be submitted to
the arbitrator for resolution.
[3] We note that plaintiff asserts in its brief that the
arbitration agreement was unconscionable, and therefore
unenforceable. The trial court made no such ruling. Had plaintiff
wished to present an alternative basis in law for supporting the
trial court's order, it was required to make a cross-assignment of
error pursuant to Rule 10(d) of the Rules of Appellate Procedure.
In the absence of such an assignment, this question is not properly
before this Court.
The parties also argue in their briefs regarding whether the
agreement and its arbitration clause are to be construed under the
North Carolina Uniform Arbitration Act or the Federal Arbitration
Act (FAA). The FAA will apply if the contract evidences a
transaction involving interstate commerce. See Sillins v. Ness,
___ N.C. App. ___, ___, 596 S.E.2d 874, 876 (2004) (citing 9 U.S.C.
§ 2)). This is a question of fact, which an appellate court should
not initially decide. Eddings v. Southern Orthopedic &
Musculoskeletal Assocs. P.A., 356 N.C. 285, 569 S.E.2d 645 (2002),
(per curiam) (adopting dissent of Greene, J., 147 N.C. App. 375,
385, 555 S.E.2d 649, 656 (2001)). This question should be
determined by the trial court upon remand. Id.
We hold that the trial court erred in denying defendants'
motion to compel arbitration and to stay this matter pending
arbitration. It was thus improper for the trial court to grant
plaintiff's motion for partial summary judgment. In light of our
ruling on defendants' first assignment of error, it is unnecessaryfor this Court to address their second assignment of error. The
order of the trial court is vacated and this matter is remanded to
the trial court for further proceedings consistent with this
opinion.
VACATED AND REMANDED.
Judges CALABRIA and ELMORE concur.
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