In Murphy Oil USA Inc., v. SR International Business Insurance Co. Ltd., et al., the insured sought coverage from its various excess insurers for losses resulting from an oil spill caused by Hurricane Katrina. No. 07-1071, 2007 U.S. Dist. LEXIS 69732 (W.D. Ark., Sept. 20, 2007). Murphy's excess insurers in turn served a notice of their intent to arbitrate any coverage dispute in London, pursuant to an arbitration clause contained in each insurer's policy. Murphy responded by commencing suit against its excess insurers and obtaining a temporary restraining order barring its excess insurers from enjoining the litigation in another forum. Upon the expiration of the temporary restraining order, Murphy petitioned the court to enter a preliminary injunction.
One of Murphy's excess insurers, SR International Business Insurance Company, Ltd. ("SRI"), opposed the motion, arguing that Murphy failed to establish the elements necessary for such relief including, among other things, the threat of irreparable harm. Murphy argued that it would be irreparably harmed if the court did not prevent SRI from obtaining an anti-suit injunction from a foreign tribunal, which would prevent Murphy from relying upon the protection of an Arkansas statute prohibiting the enforcement of arbitration agreements in insurance contracts. See Ark. Code Ann. § 16-108-201(b).
SRI, on the other hand, argued that Arkansas law was not applicable to the parties' dispute, as the policy’s express language provided for the application of New York law. SRI further argued that even if New York law did not apply to the dispute, the New York Convention supporting enforcement of arbitration agreements between international commercial entities would supercede any state law prohibiting arbitration clauses in insurance contracts.
Relying on a decision from the U.S. Court of Appeals for the Second Circuit, Murphy contended that Arkansas law preempted the New York Convention because, under the McCarran-Ferguson Act, state laws that regulate the business of insurance generally take precedence over federal laws that are not specifically applicable to the business of insurance but have the effect of impairing state insurance laws. See Stephens v. American Int'l Ins. Co., 66 F.3d 41, 45 (2d Cir. 1995). The court in Murphy, however, adopted the reasoning set forth by the United States Court of Appeals for the Fifth and Eleventh Circuits and held that "the New York Convention must be enforced according to its terms over all prior inconsistent rules of law," including the McCarran-Ferguson Act. Citing Indus. Risk Insurers v. M.A.N. Gutehoffnungshutte GmbH, 141 F.3d 1434 (11th Cir. 1998) and Sedco, Inc. v. Petroleos Mexicanos Mexican Nat'l Oil Co., 767 F.2d 1140 (5th Cir. 1985). The court also found that, based upon principles of international comity, the New York Convention's pro-arbitration policy superceded the Arkansas statute prohibiting arbitration agreements in insurance policies, as the underlying dispute arose out of international commerce.