ALLSTATE PROPERTY AND CASUALTY INSURANCE COMPANY, Plaintiff/Appellee,
WATTS WATER TECHNOLOGIES, INC., Defendant/Appellant. STATE FARM FIRE AND CASUALTY INSURANCE COMPANY, Plaintiff/Appellee,
WATTS REGULATOR COMPANY, Defendant/Appellant.
from the Superior Court in Mohave County No. S8015CV201600190
The Honorable Charles W. Gurtler, Judge
from the Superior Court in Maricopa County No. CV2016-005213
The Honorable James T. Blomo, Judge (Retired)
Loewe Witt & Maxwell, PLLC, Scottsdale By Frank B.
Jancarole Counsel for Appellee Allstate
Manning & Kass Ellrod, Ramirez, Trester, LLP, Phoenix By
Scott A. Alles, Keith R. Ricker Co-Counsel for Appellee State
Farm Grotefeld, Hoffmann, Schleiter, Gordon, Ochoa &
Evinger, LLP, Geneva, Illinois By Jonathan Tofilon Co-Counsel
for Appellee State Farm
Grotefeld, Hoffmann, Schleiter, Gordon, Ochoa & Evinger,
LLP, Minneapolis, Minnesota By Daniel W. Berglund Co-Counsel
for Appellee State Farm
Brisbois Bisgaard & Smith LLP, Phoenix By James K. Kloss,
Adam S. Polson Counsel for Appellant Watts
John C. Gemmill  delivered the opinion of the Court,
in which Presiding Judge Kenton D. Jones and Judge Jon W.
Watts Water Technologies, Inc. ("Watts") appeals
the denial of its motions to dismiss and compel arbitration.
The parties disagree about whether these product liability
subrogation claims are subject to mandatory contractual
arbitration. For the following reasons, we reverse and remand
for proceedings consistent with this opinion.
In April 2014, a Watts-made water supply line allegedly
failed at the residence of Terry and Lisa McNemar, causing
property damage. The McNemars' insurer, Allstate Property
and Casualty Insurance Company ("Allstate"), paid
$53, 149.65 for the McNemars' loss and nearly two years
later, in March 2016, filed a subrogation action against
In June 2014, Russell and Pam Vaughn suffered property damage
following the alleged malfunction of a reverse osmosis water
filter manufactured by Watts. The Vaughns were insured by
State Farm Fire and Casualty Insurance Company, Inc.
("State Farm"). State Farm paid $15, 675.00 for the
Vaughns' loss and filed a subrogation action against
Watts in April 2016.
At the time of the incidents causing property damage,
Allstate, State Farm (collectively, "the
Insurers"), and Watts were parties to a Property
Subrogation Arbitration Agreement ("the Agreement")
promulgated by Arbitration Forums, Inc. ("AF"),
which required that signatory companies forego litigation and
arbitrate property subrogation claims. Article First of the
Agreement, signed by Allstate in 1996 and State Farm in 2003,
provided in pertinent part:
Signatory companies are bound to forego litigation and in
place thereof submit to arbitration any questions or disputes
which may arise from . . . any fire subrogation or property
damage claim not in excess of $100, 000.
Agreement, signed by Watts in 2005, also provided, in Article
Fifth, that "AF, representing the signatory companies,
is authorized to . . . (a) make appropriate Rules and
Regulations for the presentation and determination of
controversies under this Agreement."
In November 2014, AF advised its signatory members through an
e-bulletin that, effective January 1, 2015, it was adding a
"new exclusion" to the Agreement that would remove
product liability claims arising from allegedly defective
products from the claims subject to mandatory ...