Arch wins ruling on arbitration in sexual misconduct case

A federal district court ruled in favor of Arch Specialty Co. on Monday and said it does not have to submit to arbitration in a dispute with the University of Southern California over coverage involving a former USC physician charged with sexual misconduct.

Jersey City, New Jersey-based Arch Specialty had issued two excess health care professional liability insurance for two policy period covering July 1, 2016, to July 2018 that provided coverage in excess of $100 million, according to Monday’s ruling by the U.S. District Court in Los Angeles in Arch Specialty Insurance Co. v. University of Southern California.

The Arch policies included an exclusion for claims arising out of abuse or molestation, the ruling said. In May 2018, the Los Angeles Times published an article that alleged the university had allowed a doctor, Dr. George Tyndall, to continue practicing in its student health center as a gynecologist despite being accused of sexual misconduct.

Arch alleges that when the USC learned of the impending story, without telling the insurer, it demanded Arch reform its policies by deleting the abuse or molestation exclusion, and that it  is now seeking coverage from it for the lawsuits arising from Dr. Tyndall’s alleged misconduct.

Arch filed suit, seeking a declaration that the abuse or molestation exclusion is a term of its policies or, alternatively, seeking rescission of its policies based on USC’s failure to disclose allegations of abuse when USC applied for the policies.

USC moved to compel arbitration, contending its “follow-form clause or following form clause” incorporated underlying policies’ arbitration provision.

The ruling states that while there is an arbitration provision in underlying coverage provided by Alamo, California-based BETA Risk Management Authority it is “written for BETA members only.”

“Under the totality of the circumstances, the BETA arbitration provision is inconsistent with the Arch Policies – there is no indication that the parties agreed to arbitrate through the follow-form clause here,” the ruling said, in denying USC’s motion to compel arbitration.

Attorneys in the case did not respond to requests for comment.

Nevada casino workers said they have been granted expedited arbitration on their complaints about worker safety.