Certain Underwriters at Lloyds, London v. 3131 Veterans Blvd LLC

Background

Several insurers jointly participated in an insurance policy issued to 2121 Borders, LLC for property in Metairie, Louisiana. Hurricane Ida damaged the property on August 29, 2021. Borders later sold the property to 3131 Veterans Blvd LLC, which asserted that Borders had assigned its rights under the policy to it. The parties disputed whether that assignment was valid and how much of the damage the policy covered.

The insurers alleged that 3131 Veterans violated the policy’s arbitration agreement by suing some of the insurers in Louisiana state court. They demanded arbitration of the disputes, including the claims in the Louisiana lawsuit. The insurers asked this court to compel arbitration and to prevent 3131 Veterans from continuing to litigate the dispute outside arbitration. 3131 Veterans opposed those requests and moved to dismiss the federal case for lack of personal jurisdiction.

Legal framework

The court explained that whether the parties agreed to arbitrate is generally a question for a court unless the agreement clearly and unmistakably assigns that question to an arbitrator. The insurers relied on the Federal Arbitration Act and the federal statute implementing the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

3131 Veterans relied on the McCarran-Ferguson Act and the Louisiana Insurance Code. The McCarran-Ferguson Act can prevent a federal law from overriding a state law enacted to regulate insurance when the federal law does not specifically concern insurance.

Louisiana Revised Statute § 22:868 generally makes void an insurance-contract provision that deprives Louisiana courts of jurisdiction or venue over an action against the insurer. The statute also includes an exception for certain forum-selection clauses in policy forms that do not require approval by the Louisiana Department of Insurance.

Analysis

The court first concluded that § 22:868, rather than another Louisiana provision concerning legal process against unauthorized insurers, was the more specific statute for the dispute. The court then considered Louisiana decisions addressing whether § 22:868 prohibits arbitration clauses in insurance contracts. It found that decisions discussing arbitration clauses specifically supported 3131 Veterans’ position, while the insurers’ cited cases primarily addressed forum-selection clauses.

The court also noted a conflict between Fifth Circuit and Second Circuit authority concerning whether the McCarran-Ferguson Act overrides the Convention in this context. The Second Circuit had held that the McCarran-Ferguson Act preempts the Convention. Because this case was in the Second Circuit, the court followed that rule and applied § 22:868 without giving the Convention priority.

The court therefore held that § 22:868 controlled and rendered the arbitration clause in the policy unenforceable.

Ruling

The court denied the insurers’ Petition to Compel Arbitration. Because the arbitration petition was denied, the court denied as moot the insurers’ Motion to Enjoin the Louisiana State Court Action and 3131 Veterans’ Motion to Dismiss for Lack of Personal Jurisdiction. The Clerk was directed to close those motions and the case.