Applying Wisconsin law, the Seventh Circuit Court of Appeals determined the parties did not have an agreement to arbitrate because, even though their excess/reinsurance agreement contained "follow form" language, and the underlying contract to which the policy followed form contained an arbitration provision, it nevertheless "merely codifie[d] a procedure whereby the parties can potentially agree to arbitrate." The procedure required: (1) a demand by the insured; (2) a dispute between the insurers about liability; (3) payment by each insurer of half the disputed amount; and (4) acceptance of payment by the insured.
Although the insured and the insurers on the underlying policy met these steps prompting arbitration, none occurred with respect to the excess/reinsurance policy. The excess/reinsurance insurer never received a request for payment from the insured or made a payment to the insured. As such, the Court determined the parties did not agree to arbitrate a dispute with the excess/reinsurance insurer.
State of Wisconsin Local Government Property Ins. Fund v. Lexington Ins. Co., No. 15-1973 (7th Cir. Oct. 21, 2016).
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