Fifth Circuit Holds that International Insurance Contracts are Subject to Arbitration Regardless of Individual States’ Laws

The United States Court of Appeals for the Fifth Circuit held earlier this week that state law does not reverse-preempt the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, a treaty requiring its signatories, including the United States, to recognize written agreements to arbitrate. At issue was a Louisiana statute providing that no insurance contract delivered in that state could deprive Louisiana’s courts of jurisdiction in any action against an insurer, a provision frequently cited by Louisiana courts in invalidating arbitration provisions in insurance contracts. The United States District Court for the Middle District of Louisiana had held that the McCarran-Ferguson Act, a federal law expressly leaving the regulation of insurance up to the states, required the application of Louisiana’s statute. The Court of Appeals disagreed, however, since the Act specifies only that no “Act of Congress” will supersede state law without addressing the effect of treaties.

The case is Safety Nat’l Cas. Corp. v. Certain Underwriters at Lloyds, London, No. 06-30262 (Nov. 16, 2009).