Missouri Court Holds Arbitration Clause In Insurance Contract Unenforceable As Against Public Policy And Under Governing Law

A Missouri district court recently held a mandatory arbitration provision was unenforceable in an insurance coverage dispute after an electrician was injured on the job and won an uncontested judgment in state court against Solaris Power Services ("Solaris"). His employer was insured by Liberty Mutual and had excess insurance through AEGIS. The plaintiffs in the present case, including Solaris, sued both insurers and alleged they should have been additional insureds under both policies and their coverage claims were wrongly denied. AEGIS moved to stay the proceedings and compel arbitration pursuant to a mandatory arbitration provision in its excess insurance policy. The various parties disputed which state's law applied. The court ultimately denied the motion, holding the mandatory arbitration provision was unenforceable.

First, the court concluded the arbitration clause was unenforceable as it contravened Missouri public policy. Missouri choice of law rules allow for the application of another state's law as long as the law "is not contrary to a fundamental policy of Missouri." Application of North Dakota law (as advocated for by AEGIS) or any other state's law that would enforce the arbitration provision was inappropriate as it would contravene Missouri law prohibiting mandatory arbitration clauses...

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