Arrow Recycling Solutions, Inc., and Arrow Environmental Solutions, Inc is a metal recycler. Just before its workers’ compensation insurance coverage was due to expire Arrow provided payroll information to Patriot Risk and Insurance Services, Inc, an insurance broker,.for the purpose of obtaining a proposal for a replacement policy. Patriot replied with a Producer’s Quote and the estimated “annual pay-in amount” was $232,094. Arrow executed a Request to Bind this policy, and later received a policy and related profit sharing agreements with the insuring entities.

Arrow alleges in a civil complaint it later filed against the carriers and broker that despite a “very good claims history,” the actual pay-in amount billed for the first year was approximately $490,000, which exceeded the estimated annual pay-in amount of $232,094. Arrow alleges that the reason for this discrepancy was that the Billing Terms “contained mathematical falsehoods” involving the misclassification of payroll amounts from higher premium classifications to lower premium classifications. Arrow alleges that it would not have purchased the workers’ compensation insurance if it had known of this inaccuracy.

However the the “Request to Bind” document signed by Arrow included an arbitration provision . The words “Initial Here” appeared under a box next to the arbitration provision. That box was empty and contained no initials in the copy of the Request to Bind attached to the complaint. Later Arrow received as part of its policy package a Reinsurance Participation Agreement (RPA). Paragraph 13 of the RPA included an arbitration provision.

The defendants filed a motion to compel arbitration and stay the trial court proceedings. They argued that all of the counts alleged against them were within the scope of the arbitration agreement in the RPA. Alternatively, they argued that any claims not covered by the arbitration agreement in the RPA were within the scope of the arbitration agreement in the Request to Bind. They also argued that Patriot had agreed to participate in any court ordered arbitration and that the fact that Patriot was not a party to the arbitration agreements did not preclude arbitration. The trial court denied the motion to compel arbitration and the defendants appealed. The Court of Appeal affirmed the denial of the motion in the unpublished case Arrow Recycling Solutions v. Applied Underwriters.

A party moving to compel arbitration bears the burden of proving by a preponderance of evidence the existence of an arbitration agreement.. An officer of Arrow stated in his declaration that the box next to the arbitration provision in the Request to Bind that he signed was left blank and did not contain his initials. His assistant Patti declared that she sent the signed Request to Bind to Patriot and that neither the initials nor the word “none” was present on the document that she provided. Defendants claim the document they received had the box checked, but the officer claimed that the handwriting was not his and the defendant’s copy was initialed by someone else.

The defendants as the parties moving to compel arbitration had the burden of producing evidence sufficient to establish the existence of an arbitration agreement in the Request to Bind, such as evidence that Patriot initialed the Request to Bind as Arrow’s agent. The defendants failed to present such evidence. The Court of Appeal concluded that the declarations of Arrow’s officers and his assistant constitute substantial evidence supporting the implied finding that Arrow never agreed to the arbitration provision in the Request to Bind and that, therefore, there was no such arbitration agreement.