In a case we have been following on www.insurereinsure.com (click here for our most recent post), the Louisiana Safety Association of Timberman-Self Insurers Fund ("LSAT") recently filed a supplemental brief petitioning the U.S. Supreme Court to grant certiorari to address whether the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "Convention") preempts a Louisiana Statute that bars enforcement of arbitration agreements in insurance or reinsurance contracts.
Relying upon a Second Circuit decision – Stephens v. American Int'l Ins. Co. – LSAT contends that the Convention is an "Act of Congress" within the meaning of the McCarran-Ferguson Act that does not specifically relate to the business of insurance, and therefore does not preempt Louisiana insurance law related to arbitration. LSAT further asserts that, as recognized by the Second Circuit in Stephens, the Convention is not a "self-executing" treaty that falls outside the scope of McCarran-Ferguson Act.
LSAT also contends that the federal policy favoring the enforcement of arbitration agreements does not permit a court to ignore the reverse preemption language of the McCarran-Ferguson Act. Accordingly, LSAT argues that the Fifth Circuit improperly elevated the purpose of one federal law over the plain meaning of another in holding that the portion of the Convention requiring courts to enforce written agreements to arbitrate control over the Louisiana statute prohibiting arbitration of insurance disputes.
Moreover, LSAT argues that, at a minimum, a conflict between decisions of the Second and Fifth Circuits justifies granting certiorari. Specifically, LSAT notes that sixteen states have enacted laws that prohibit arbitration clauses in some or all insurance contracts, and that the Fifth Circuit's decision calls into question the validity of these state laws in all cases in which a policyholder contracts with a foreign insurance company.