Plaintiff HCF Insurance Agency provides brokerage and agency services for casualty, accident and health, property, life and surplus lines of insurance. Plaintiff is a California corporation with its principal place of business in Los Angeles. Plaintiff is authorized to conduct business in California. Shomer Insurance Agency, Incorporated and Intercare Specialty Risk Services are direct competitors with plaintiff in the insurance market in the greater Los Angeles area. They specialize in brokering workers’ compensation policies for extended care facilities.
Defendant Patriot Underwriters had a sub-producer agreement with Intercare Specialty Risk Services and Shomer Insurance Agency, Incorporated. Patriot is a Delaware corporation with its principal place of business in Fort Lauderdale, Florida. Patriot is a program administrator and managing general underwriter servicing regional and national workers’ compensation insurance carriers. Patriot provides products to insurance agencies and wholesalers with expertise in workers’ compensation. It also offers services such as claims and risk management. Patriot is in competition with other managing general underwriters in California such as Safety National Casualty Company.
Defendant Patriot specializes in the creation and management of new individual, agency, or group captive insurers for workers’ compensation. A captive insurer is a dedicated in-house subsidiary entity which provides insurance to its owner, a parent corporation. The parent corporation pays premiums to the captive insurer rather than an outside firm to insure some business risk. The captive insurer reinvests the premiums it receives and then pays claims by drawing on the principal and return on its investment. Captive insurers can lower costs and facilitate coverage for certain hard-to-insure risks that traditional carriers may not underwrite.
Around July 2012, Patriot considered entering into a business relationship with plaintiff HCF Insurance Agency. The enterprise was to involve plaintiff’s healthcare-based workers’ compensation business. Ultimately the effort resulted in litigation between the parties after a convoluted series of events. Plaintiff HCF Insurance Agency filed a first amended complaint containing multiple causes of action against defendant Patriot Underwriters and other parties. It alleges the following causes of action: contract breach (first); breach of the implied covenant of good faith and fair dealing (second); fraud (third); intentional interference with economic advantage (fourth); and unlawful group boycott in violation of Business and Professions Code section 16720 et seq., also known as the Cartwright Act (ninth).
Defendant Patriot moved to compel arbitration pursuant to an agreement signed by plaintiff. The trial court ordered arbitration as to the contract and implied covenant breach claims because those two causes of action were within the scope of the arbitration agreement. The trial court denied the arbitration petition as to the fraud and intentional interference with economic advantage causes of action. The trial court ruled those two claims did not fall within the scope of the arbitration agreement. The trial court also denied the arbitration petition as to the Cartwright Act cause of action. The trial court ruled application of the arbitration clause’s Florida choice-of-law provision prevented plaintiff from securing any relief. The trial court found the group boycott claim involved an important public policy because it is California’s antitrust statute.
Defendant, Patriot Underwriters appealed the order partially denying its motion to compel arbitration against plaintiff, HCF Insurance Agency. The trial court was affirmed by the court of appeal in the unpublished case of HCF Insurance Agency v Patriot Underwriters Inc.
The trial court denied the arbitration petition as to the fraud and intentional interference with economic advantage causes of action. The trial court ruled those two claims did not fall within the scope of the arbitration agreement. The trial court also denied the arbitration petition as to the Cartwright Act cause of action. The trial court ruled application of the arbitration clause’s Florida choice-of-law provision prevented plaintiff from securing any relief. The trial court found the group boycott claim involved an important public policy because it is California’s antitrust statute. After review of Florida, California and federal law, the Court of Appeal agreed and affirmed the order.