In an action to compel arbitration under payment agreements entered into between National Union and its insured, the New York Court of Appeals held the determination of arbitrability was not barred by the McCarran Ferguson Act, and would be decided by an arbitration panel, despite the fact National Union did not file copies of its workers’ compensation insurance policies in accordance with California Insurance Code § 11658. § 11658 requires workers’ compensation insurers to file copies of policies prior to issuance and at the time the payment agreements at issue were entered into. California law did not mandate a specific form or content of arbitration clauses, nor otherwise restrict their use. The law was later amended, requiring arbitration provisions in workers’ compensation policies or endorsements be disclosed to each potential insured, and failure to do so resulted in a default to California as the choice of law and forum (see § 11658.5).
Since California law did not prohibit arbitration in the insurance context, no law would be “invalidated, superceded or impaired” by application of the FAA, and thus the McCarran Ferguson Act does not reverse preempt the FAA with respect to § 11658. It was therefore up to the arbitrators – not the Court – to determine the question of whether the payment agreements’ arbitration provisions, and the agreements themselves, are enforceable under California law, despite the fact they were not filed in accordance with § 11658. The parties were required to arbitrate as they had clearly delegated the question of arbitrability and enforceability of the arbitration clauses to the arbitrators, and pursuant to the FAA, such arbitration provisions should be enforced as written.
Monarch Consulting, Inc., et al. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., et al., Case No. 8 (N.Y. Feb. 18, 2016)
This post written by Nora A. Valenza-Frost.
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