Chase

The court below refused to order arbitration despite an arbitration agreement in an insurance contract between the parties. Blue Cross of California (Blue Cross) contends the court misapplied governing state case law in denying arbitration. Alternatively, Blue Cross argues state case law is preempted to the extent it conflicts with the Federal Arbitration Act (FAA) ( 9 U.S.C. § 1 et seq.). We agree with Blue Cross’s first contention. Consequently, we reverse and remand for reconsideration under the proper state law standard. Additionally, we hold state law on this subject is not preempted by the FAA.

Facts

In 1988, Shelley Chase contracted with Blue Cross for medical insurance. The coverage was obtained through her employment and included her dependents. Her benefit plan provided for mandatory binding arbitration in the event of a dispute. The arbitration condition was set out in the benefits handbook provided to Chase.

In July 1991, Chase’s son, Micah, was diagnosed with acute myelocytic leukemia and thereafter received extensive medical care. Between September 9, 1991, and August 30, 1994, Chase received many “explanation of benefits” forms from Blue Cross, along…