McDonnel Group, L.L.C. v. Great Lakes Ins. SE, UK Branch, No. 18-30817 (4th Cir. May 13, 2019).
In this non-reinsurance case, the Fourth Circuit affirmed a district court order holding that a state anti-arbitration statute was preempted by the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (Convention). That holding is not surprising, as the Fourth Circuit had previously held that a treaty is not a law passed by Congress and, therefore, is not reverse preempted by the McCarran-Ferguson Act.
What is new in this case, as the court stated, is how a “conformity to statute” provision in the insurance policy affects the analysis. A “conformity to statute” provision basically provides that if a provision of a policy is inconsistent with state law, then the policy is amended to conform to state law. Here, the policyholder argued that the state law anti-arbitration provision must “amend out” the arbitration provision in the insurance policy. The district court held, and the circuit court affirmed, that because the Convention preempts state law, the state anti-arbitration provision cannot apply to the policy in dispute. And because the statute does not apply to the policy, there is no conflict between the policy and state law. Therefore, the conformity provision is not triggered and the arbitration provision survives.