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Supreme Court Asks for Solicitor General’s Opinion in Insurance Arbitration Case

LOUISANA SAFETY ASS’N OF TIMBERMAN V. CERTAIN UNDERWRITERS AT LONDON  (U.S. MAY 17, 2010)  

The Supreme Court recently invited the Solicitor General to file a brief expressing the views of the United States in Louisiana Safety Ass’n v. Certain Underwriters at Lloyd’s, London. The case centers on whether the Federal Arbitration Act preempts the McCarran-Ferguson Act, which grants states the authority to regulate insurance. In Louisiana Safety, the Fifth Circuit held that the McCarran-Ferguson Act does not authorize state law to reverse-preempt international treaties, including the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The McCarran-Ferguson act allows Congress to pass laws that regulate the “business of insurance.”

It also provides that federal acts that do not expressly purport to regulate the “business of insurance” will not preempt state laws or regulations that regulate the “business of insurance.” Federal courts have consistently backed state prohibitions on arbitration agreements in insurance contracts as laws that regulate the “business of insurance” under the McCarran-Ferguson Act and, therefore, are protected from preemption. Courts have applied this rule to reinsurance agreements as well.

The Fifth Circuit, however, split with other federal courts in finding that the McCarran-Ferguson Act does not reverse-preempt the International Arbitration Convention. The Fifth Circuit’s decision created a circuit split because the Second Circuit previously held that a state law can reverse-preempt the Convention Act under the McCarran-Ferguson Act. While the Supreme Court has not decided whether to hear the dispute, it appears that the Solicitor General’s brief on the subject may persuade the justices to consider it. Given the recent nomination of Solicitor General Elena Kagan to the Supreme Court, it is unclear when the Solicitor General’s office will file a brief.

IMPACT (ARBITRATION): One month after the Stotl-Nielsen decision by the Supreme Court, the Supreme Court again is seeking to frame the scope and power of the Federal Arbitration Act. It will be interesting to see how the court decides but if recent precedent is any indication, the Court will decline to preempt the McCarran-Ferguson Act absent clear language contained in the Federal Arbitration Act.

All content © 2019 Goldberg Segalla LLP

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About this Author

Jeffrey L. Kingsley, Goldberg Segalla, Insurance attorney
Partner

Jeffrey Kingsley maintains an international practice that focuses on matters involving insurance and reinsurance coverage, commercial and regulatory issues, and extra-contractual liability arbitration and litigation. As a leader in Goldberg Segalla’s reinsurance practice he has extensive experience handling and consulting clients on complex reinsurance allocation issues, regulatory issues, arbitrations, transactional issues, and disputes involving the follow-the-fortunes doctrine.

Jeff provides comprehensive legal representation for Fortune 500 companies, insurers,...

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Thomas F. Segalla, Insurance Attorney, Goldberg Segalla Law Firm

Thomas F. Segalla, is the co-author of the renowned insurance law treatise Couch on Insurance 3d and is one of the founding partners of the firm.  Mr. Segalla is a nationally recognized reinsurance and insurance expert who has been retained by numerous insurance carriers and policyholders.  His active practice focuses on the defense and insurance coverage aspects of matters involving bad faith; construction site personal injury accidents (Labor Law §§ 200, 240(1) and 241(6)); and toxic tort and environmental issues. As a member of the Defense Research Institute (DRI), he is the Past Chair of the Insurance Law Committee and served on the Board of Directors and is the past Chair of the Law Institute. In addition, as a member of the Federation of Defense and Corporate Counsel, he is integrally involved in the relationship between the Insurance Industry and defense counsel. He has published and lectured extensively for many professional organizations.  Mr. Segalla possesses an AV rating from Martindale-Hubbell and has been named to the Top 50 of the New York Super Lawyers.

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