Safety Nat. Cas. v. Cert. Under., Lloyd's, London

587 F.3d 714
CourtCourt of Appeals for the Fifth Circuit
DecidedOctober 2, 2008
Docket06-30262
StatusPublished
Cited by2 cases

This text of 587 F.3d 714 (Safety Nat. Cas. v. Cert. Under., Lloyd's, London) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Safety Nat. Cas. v. Cert. Under., Lloyd's, London, 587 F.3d 714 (5th Cir. 2008).

Opinion

543 F.3d 744 (2008)

SAFETY NATIONAL CASUALTY CORPORATION, Plaintiff-Appellee,
Louisiana Safety Association of Timbermen-Self Insurers Fund, Intervenor Plaintiff-Appellee,
v.
CERTAIN UNDERWRITERS AT LLOYD'S, LONDON; et al., Defendants,
Certain Underwriters At Lloyd's, London, Defendant-Appellant.
Certain Underwriters At Lloyd's, London, Plaintiff-Appellant,
v.
Safety National Casualty Corporation; Louisiana Safety Association of Timbermen, Defendant-Appellee.

No. 06-30262.

United States Court of Appeals, Fifth Circuit.

September 29, 2008.

*746 William E. Scott, III, Michael P. Wilson, Watson, Blanche, Wilson & Posner, Baton Rouge, LA, Andrew K. Epting, Jr. (argued), Pratt-Thomas, Pearce, Epting & Walker, Charleston, SC, for Safety Nat. Cas. Co.

Joseph John Bailey (argued), Provosty, Sadler, deLaunay, Fiorenza & Sobel, Alexandria, LA, for LA Safety Ass'n of Timbermen-Self Insurers Fund.

James M. Garner, Joshua Simon Force, Sher Garner Cahill Richter Kelin & Hilbert, Alan D. Ezkovich (argued), New Orleans, LA, Jacob Albert Airey, Airey & Blanchard, Slidell, LA, for Certain Underwriters At Lloyds, London.

Before KING, DeMOSS and OWEN, Circuit Judges.

OWEN, Circuit Judge:

The basis for this interlocutory appeal pursuant to 28 U.S.C. § 1292(b) is the district court's denial of a motion to compel arbitration of a contractual dispute among three insurers. The district court concluded that because of the McCarran-Ferguson Act,[1] the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (Convention)[2] and federal legislation providing that the Convention shall be enforced in United States courts, found in 9 U.S.C. §§ 201-208, are reverse preempted by LA.REV.STAT. ANN. § 22:629. We disagree.

I

Louisiana Safety Association of Timbermen-Self Insurers Fund (LSAT) is, as its name implies, a self-insurance fund operating in Louisiana. It provided workers' compensation insurance for its members. Certain Underwriters at Lloyd's, London (the Underwriters) provided excess insurance to LSAT by reinsuring claims for occupational-injury occurrences that exceeded the amount of LSAT's self-insurance retention. Each reinsurance agreement contained an arbitration provision.

Safety National Casualty Corporation (Safety National) also provides excess workers' compensation coverage and alleges that in a loss portfolio transfer agreement, LSAT assigned its rights under the reinsurance agreements with the Underwriters to Safety National. The Underwriters refused to recognize the assignment, contending that LSAT's obligations were strictly personal and therefore non-assignable.

Safety National sued the Underwriters in federal district court. The Underwriters filed an unopposed motion to stay proceedings and compel arbitration. The district court initially granted that motion and stayed the lawsuit.

*747 The Underwriters initiated arbitration proceedings with Safety National and LSAT; however, the parties could not agree upon how arbitrators were to be selected. The Underwriters then filed a motion to lift the stay in order to join LSAT as a party in the district court and to compel arbitration to resolve the dispute about how to compose the arbitration panel. In response, LSAT moved to intervene, lift the stay, and quash arbitration. LSAT asserted that the arbitration agreements were unenforceable under Louisiana law. While those motions were pending, the Underwriters filed a separate action against Safety National and LSAT seeking recovery of unpaid premiums under the policies. The district court consolidated the two actions.

The district court ultimately reconsidered its initial decision and granted LSAT's motion to quash arbitration. The district court concluded that although the Convention would otherwise require arbitration, a Louisiana statute[3] that has been interpreted to prohibit arbitration agreements in insurance contracts was controlling. The district court reasoned that since that statute had "the purpose of regulating the business of insurance" within the meaning of the McCarran-Ferguson Act, the Louisiana statute reverse preempted the Convention.[4] The district court subsequently certified that its order embodying these rulings involves a controlling question of law as to which there is substantial ground for difference of opinion and an immediate appeal pursuant to 28 U.S.C. § 1292(b) may materially advance the termination of the litigation. We granted leave to appeal.

II

The Louisiana statute at issue provides:

A. No insurance contract delivered or issued for delivery in this state and covering subjects located, resident, or to be performed in this state ... shall contain any condition, stipulation, or agreement:
....
(2) Depriving the courts of this state of the jurisdiction of action against the insurer.
....
C. Any such condition, stipulation, or agreement in violation of this Section shall be void, but such voiding shall not affect the validity of the other provisions of the contract.[5]

Although it is not clear from this provision's text that arbitration agreements are voided, Louisiana courts have held that such agreements are unenforceable because of this statute.[6]

The McCarran-Ferguson Act provides that "Congress hereby declares that the *748 continued regulation and taxation by the several States of the business of insurance is in the public interest, and that silence on the part of the Congress shall not be construed to impose any barrier to the regulation or taxation of such business by the several States."[7] The Act further provides, "[n]o Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance ...."[8]

The Convention does not specifically relate to the business of insurance. Nor do Underwriters challenge the district court's conclusion that LA.REV.STAT. ANN. § 22:629, when applied to disputes arising under reinsurance agreements between insurers, regulates the business of insurance within the meaning of the McCarran-Ferguson Act.[9] Accordingly, we will assume, without deciding, that the Louisiana statute does regulate the business of insurance, although the matter is not entirely free from doubt. One of the criteria for determining whether a law regulates the business of insurance is whether it has the effect of spreading or transferring a policyholder's risk.[10] The Supreme Court has emphasized that arbitration agreements are forum-selection provisions and do not displace substantive rights afforded by a statute or other substantive law.[11] An argument could be made that at least in theory, resolving claims in an arbitration rather than in a court before a jury does not substantially affect the risk pooling arrangement between the insurer and the insured. However, this court has held in American Bankers Insurance Co. of Florida v. Inman that the Federal Arbitration Act

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Bluebook (online)
587 F.3d 714, Counsel Stack Legal Research, https://law.counselstack.com/opinion/safety-nat-cas-v-cert-under-lloyds-london-ca5-2008.