The law sometimes has some strange twists. Right now, if a Louisiana policyholder were to challenge Lloyds claims that arbitration was mandated and do so in a federal Louisiana court, the policyholder would lose. But, if Louisiana policyholder challenged the same issue in a New York federal court, the policyholder would win.
A hot off the press ruling from New York says that states can prevent Lloyds and other foreign insurers from mandating arbitration and acknowledged that the federal courts in Louisiana are coming to a different ruling:1
To be sure, ‘[i]n cases involving at least some foreign insurers, Fifth Circuit courts have: 1) held that the MFA does not preempt the Convention, which in turn preempts Section 22:868, making arbitration clauses in insurance contracts enforceable; and 2) extended the enforceability of arbitration clauses to domestic insurers that jointly insure property with foreign insurers through a type of equitable estoppel known as Grigson estoppel.’ 3131 Veterans Blvd LLC, 2023 WL 5237514, at *5; see also Georgetown Home Owners Ass’n, Inc. v. Certain Underwriters at Lloyd’s, London, 2021 WL 359735, at *8 (M.D. La. Feb. 2, 2021) (‘[W]here the Convention applies, La. Rev. Stat. § 22:868 has no effect.’); Port Cargo Serv., LLC v. Certain Underwriters at Lloyd’s London, 2018 WL 4042874, at *7 (E.D. La. Aug. 24, 2018) (applying Grigson estoppel).
But the Fifth Circuit caselaw dealing with foreign insurers cannot save the Insurers’ claim here because ‘[t]his caselaw is predicated on the Fifth Circuit’s ruling that the MFA does not preempt the Convention.’ 3131 Veterans Blvd LLC, 2023 WL 5237514, at *6. The Second Circuit, by contrast, has held that the Convention does not preempt a state act which regulates the business of insurance. See Stephens, 66 F.3d at 45 (‘The Convention itself is simply inapplicable in this instance.’); see also p. 5, above. Section 22:868 thus applies ‘without regard for the effect of the Convention.’
Louisiana policyholders should obviously be challenging these clauses in New York.
My prediction is that this legal difference of opinion is important enough to have the United States Supreme Court review the matter. Parties should not be racing to one courthouse versus another to gain an advantage.
Thought For The Day
It’s okay to disagree with each other. It’s not okay to hate each other because of it.
—Ellen DeGeneres
1 Certain Underwriters at Lloyd’s, London v. Mpire, No. 22-cv-9607 (S.D. N.Y. Sept. 28, 2023).