APPELLATE COURT ENFORCES ARBITRATION CLAUSE INVOLVING NON-SUBSCRIBER WRONGFUL DEATH CLAIM

March 13, 2018

Last Thursday, the Corpus Christi Court of Appeals addressed a challenge to an arbitration clause in a non-subscriber plan and determined that the arbitrator, not the court, was the proper entity to address the challenge. In Mission Petroleum Carriers, Inc. v. Dreese, et.al., 2018 WL 1192773 (Tex. App. – Corpus Christi March 8, 2018), a Mission employee died in a Freightliner truck accident and his heirs filed a wrongful death claim against Mission alleging negligence and gross negligence. Mission is a non-subscriber to workers compensation insurance but provides employee benefits through an employee health and safety plan (Plan). The Plan, however, includes an arbitration clause requiring “all claims or disputes” to be resolved by binding arbitration. Mission filed a motion to compel arbitration which the trial court denied and this interlocutory appeal followed.

On appeal, the court examined the arbitration clause and the heirs’ assertion that the clause was unenforceable because a termination clause rendered the contract illusory and voided the contract as a whole. In response, Mission asserted that the challenge to the arbitration agreement is for the arbitrator, not the courts to decide. The court noted there are two types of challenges to arbitration provisions: “(1) a specific challenge to the validity of the arbitration agreement or clause, and (2) a broader challenge to the entire contract, either on the ground that directly affects the entire agreement, or on the ground that one of the contract’s provisions is illegal and renders the whole contact invalid.” The first type is one for the court to address, but the second must go to the arbitrator. After reviewing the termination clause, the court determined that it was applicable to the entire plan and not merely the arbitration clause at issue. Accordingly, the court reversed the trial court’s decision and remanded the case for the trial court to stay all proceedings and order arbitration.