Ex parte Rager

In Ex parte Rager, 712 So. 2d 333 (Ala. 1998) Jonathan Rager and Bessie Armistead sued Liberty National Insurance Company ("Liberty National"), alleging that Liberty National had denied coverage under a "hospital accident policy." 712 So. 2d at 334. Liberty National sought to compel arbitration of the dispute, based upon a provision in the policy it had delivered to Rager and Armistead. Rager and Armistead resisted arbitration on the ground that the application for the policy, pursuant to which they had sought insurance, did not contain an arbitration provision. Id. They argued that, although their policy contained an endorsement that included an arbitration clause, they never agreed to arbitrate, because they never signed the endorsement. Liberty National, on the other hand, contended that "the endorsement was a valid portion of the policy, and, therefore, that the arbitration clause should apply. " 712 So. 2d at 335. The Court "agreed with Liberty National." Id. In doing so, it explained: "'An application for insurance is an offer to enter into an insurance contract, and if the insurer issues a policy materially different from that applied for, the policy is a counter-offer which becomes binding only when accepted by the applicant.' Connell v. State Farm Mutual Auto. Ins. Co., 482 So. 2d 1165, 1167 (Ala. 1985). Even if the inclusion of the arbitration provision was a material alteration of the policy applied for -- and we would say it was not -- the petitioners would have accepted the counter-offer by not returning the policy and, instead, paying the premiums on it. Therefore, it does not matter that the application did not mention arbitration." 712 So. 2d at 335.