On May 13, 2019, the United States Court of Appeals for the Fifth Circuit enforced an arbitration clause in an insurance policy issued by a foreign insurer to cover damage to property in Louisiana. McDonnel Group, L.L.C. v. Great Lakes Insurance SE, UK Branch, et al., No. 18-30817 (5th Cir. May 13, 2019).
The issue before the Fifth Circuit in McDonnel was whether the policy’s conformity to statute clause negated the policy’s arbitration clause in light of Louisiana Revised Statute 22:868(A)(2). This Louisiana statute provides that no insurance contract delivered or issued for delivery in Louisiana shall contain a condition “[d]epriving the courts of this state of the jurisdiction of action against the insurer.”
The insured argued that the arbitration clause was amended by deletion due to conflict with R.S. 22:868. However, the Fifth Circuit rejected the insured’s argument, reasoning that R.S. 22:868 was preempted by the Convention on Enforcement of Foreign Arbitral Awards, a United States treaty. “Because the state statute … is preempted by the Convention, the statute does not and cannot apply to McDonnel’s policy. And because the statute does not apply to the policy, there is no conflict between the policy and the state statute.” Accordingly, the Court concluded that “the arbitration provision survives, undiminished by state law.”
As with the Louisiana Supreme Court’s recent Juban decision on May 8, 2019 enforcing a forum selection clause notwithstanding the language in R.S. 22:868, the McDonnel decision supports contracting parties’ rights “to freely engage in sophisticated contractual arrangements” in the State of Louisiana.
Click here to read the Court’s full opinion.
Lugenbuhl shareholders Céleste Elliott and Anne Briard are members of the firm's Insurance practice. Learn more about our Insurance practice here.
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