Notice is required to a policyholder only when the alteration affects coverage
An arbitration clause contained in an insurance policy is enforceable when its brevity, readability, and placement of clauses are conspicuous even if the policyholder has no actual notice of the clause.
A worker compensation insurer, Zurich American Ins., summoned the Plaintiff company and policyholder, All American Roofing, to arbitration about unpaid deductibles and retrospective premiums.
The policyholder contended that the mandatory arbitration clause that the insurer relied upon was unenforceable because the provision was a material alteration from the previous policy and thus required actual notice to the policyholder. The policyholder also contended that the insurer engaged in procedurally unconscionable means.
The Court held that notice is required to a policyholder only when the alteration affects coverage in the form of its premium, its deductibles, and its coverage. The Court held that since the arbitration clause did not alter coverage, notice was not required to the policyholder. The Court also held that the policyholder was a sophisticated party and given the brevity of the six-page document, its readability, and placement of clauses, there was nothing untoward about enforcing the arbitration clause.
However, the Court also held that with regard to the other policies that were separate, distinct contracts from the insurance policy and of which went unsigned, the policyholder was not subject to the mandatory arbitration clause because the parties’ conduct did not bind them to the agreement.
All American Roofing, Inc. v. Zurich American Ins. Co., 404 Ill.App.3d 438, 934 N.E.2d 679, 343 Ill.Dec. 355 (2010).
