Arbitration Compelled Regarding GAP Coverage

Sawyers v. Herrin-Gear Chevrolet Co., Inc.

(Miss., January 7, 2010)


The Mississippi Supreme Court held that it has jurisdiction to consider the merits of an interlocutory appeal regarding whether a claim arising from GAP coverage should be arbitrated.  Plaintiff filed a complaint alleging fraud, breach of contract and bad faith, against an auto dealer and an insurance company who provided “GAP Asset Protection Deficiency Waiver Addendum.”   The defendants made a motion to compel arbitration, which was granted by the trial court.  Plaintiff then filed a petition for interlocutory appeal, which was granted.


Plaintiff argued that the arbitration agreement between she and the auto dealer is unconscionable and unenforceable because it is to aid an illegal enterprise of selling and administering unregistered insurance.  In addition, plaintiff argues that the insurer was not a party to the agreement and should not be equitably estopped from pursing her claims against it in court.   The defendants argue that the Court has no jurisdiction to consider the appeal under the Federal Arbitration Act, because the trial court’s order was not final. 


The court held that an order compelling arbitration is a final decision and that it had jurisdiction to decide on the merits of the appeal.  Under a de novo review, the Court found that the agreement was enforceable and, relying on a bulletin issued by the Mississippi Insurance Department, determined that the GAP product was not insurance.  The court also held that because the plaintiff relied on the arbitration agreement in her claims against the insurer, the insurer was entitled to arbitration. 


A complete copy of the Court’s decision can be found here


Kim Whistler and Dan Gerber

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