Colorado Court of Appeals Strikes Down Mandatory Arbitration Clause in Insurance Policy
In an important victory for consumer rights, the Colorado Court of Appeals struck down a mandatory arbitration clause in a health insurance policy. The case is Meardon v. Freedom Life Insurance Company, found at 2018 COA 32, 2018 Colo. App. LEXIS 341, and was decided March 8, 2018. The mandatory arbitration clause provided that all disputes were to be resolved through “mandatory and binding arbitration”; the policyholder did not have the right to seek resolution of claims in federal or state court; and, if a policyholder tries to files a complaint in federal or state court, the court should dismiss the complaint. This Court held this provision conflicts with a Colorado statute (C.R.S. §10-3-1116(3)) that expressly preserves to the policyholder with health, life or disability benefits insurance the right to have his or her claim reviewed de novo in court and to a trial by jury. The policy in question, like most insurance policies, included a “conformity clause”, which provided that any provision of the policy that conflicts with the laws of the state in which the policyholder lives is amended to conform to the minimum requirements of that state’s laws. The Court held that the conformity clause here operated to invalidate the policy’s mandatory arbitration clause. The Court addressed the insurer’s argument that the Federal Arbitration Act (FAA) preempts the conformity clause, concluding it did not.
This is an important victory for consumers whose rights are too often restricted by mandatory arbitration clauses buried in contracts they have no ability to modify or negotiate. This decision signifies that, hopefully, Courts will help consumers preserve their rights to hold big corporations accountable for their bad acts in the courts and to juries, instead of being railroaded into costly arbitrations that are designed to favor big business. Get help with your case from our Colorado commercial litigation lawyers at Burg Simpson by calling 303-792-5595.