Certain Underwriters at Lloyds, London v. Mpire Properties, LLC

Background

A group of insurers issued a commercial insurance policy covering 75 Louisiana properties owned by Bayou Bulldog Apartments, LLC, Delta Dog Properties, LLC, and Henri Town Apartments, LLC. The properties were allegedly damaged by Hurricane Ida on August 29, 2021. After the original owners submitted insurance claims, they sold the properties to Mpire Properties, LLC, together with the rights under the policy.

The insurers paid Mpire $1.27 million for the property damage. Mpire then filed a Louisiana state-court action against the domestic insurers seeking additional money. Mpire disclaimed rights against the foreign insurers in that action. The policy contained an arbitration clause requiring disputes between the insured and the insurers to be submitted to arbitration in New York under New York law.

The insurers petitioned under the Federal Arbitration Act and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. They asked the court to compel Mpire to arbitrate and to stop the Louisiana state-court action.

Court’s analysis

The court explained that whether parties agreed to arbitrate is ordinarily a question for a court unless the agreement clearly assigns that question to an arbitrator. The court applied a standard similar to the standard used for summary judgment because the relevant facts were undisputed.

Mpire relied on the McCarran-Ferguson Act, a federal law that gives state laws regulating insurance priority over federal laws that do not specifically regulate insurance. Mpire argued that the Act prevented the Federal Arbitration Act and the Convention’s implementing legislation from overriding the Louisiana Insurance Code. The court agreed. It concluded that the Louisiana Insurance Code was enacted to regulate insurance and that the Federal Arbitration Act does not specifically relate to insurance. It also followed Second Circuit precedent holding that the Convention’s implementing legislation does not override a state law regulating insurance.

The parties disagreed about which Louisiana Insurance Code provision controlled. The court adopted the reasoning of a prior related federal decision and concluded that Louisiana Revised Statutes § 22:868 was more specific than § 22:442. Section 22:868 bars insurance contracts from containing terms that deprive Louisiana courts of jurisdiction or venue over actions against the insurer. Its exception for certain policy forms applies only to forum or venue selection clauses.

The insurers argued that the exception also covered arbitration clauses and relied on cases involving forum-selection clauses. The court rejected that argument, explaining that those cases did not involve insurance arbitration clauses and that Louisiana courts have treated arbitration clauses differently from forum- or venue-selection clauses. The court also rejected the insurers’ equitable-estoppel argument because that argument assumed the existence of an enforceable arbitration clause.

Disposition

The court held that the arbitration clause was unenforceable under § 22:868. The insurers’ petition to compel arbitration was denied. Their motion to enjoin the Louisiana state-court action was denied as moot. The Clerk was directed to terminate the motions pending at ECF Nos. 2 and 24 and close the case.