A Binder is Binding Enough, Alabama Supreme Court Says in Win for Arbitration Clauses

Is a binder binding, even if the property owner never received the insurance policy? Yes, it is, the Alabama Supreme Court decided in a recent case that marks another win for insurers relying on binding arbitration agreements.

When Francine Pickett’s mobile home in Pine Hill, Alabama, caught fire in 2022, she ended up suing two carriers and her insurance agent, arguing that they had acted with negligence, bad faith, or even fraud: One insurer had canceled her policy without notifying her, and what she thought was her new carrier had refused to pay the fire claim because the previous policy had been canceled for lack of premium payments, Pickett said in her lawsuit complaints.

American Bankers Insurance Co. of Florida, which held the mobile home policy from 2019 to 2022, pointed to its binding arbitration clause, requiring that the dispute be heard by an arbitrator, not a court of law. American Bankers is one of a growing number of Florida-based insurers building arbitration into their policies—as well as pre-policy documentation. Others include American Integrity Insurance, also domiciled in Florida. Florida’s insurer of last resort and the state’s largest carrier, Citizens Property Insurance Corp., now requires an option of hearing claims disputes by administrative law judges at a state agency, a resolution method similar to arbitration.

In the American Bankers’ Alabama case, a circuit court in Wilcox County found in the policyholder’s favor, noting that the arbitration agreement was part of the insurance policy, a policy the trailer owner said she never saw.

But on appeal, American Bankers argued that while Pickett may not have received the actual policy, she did receive a temporary binder of information. That binder was essentially a contract, and it mentioned the arbitration requirement. A party can assent to such an agreement without a signature, said American Bankers, which is part of the Assurant brand.

The state Supreme Court in February agreed with American Bankers’ arguments. Pickett must abide by the contract.