Enforcement of Arbitration Agreement

CLMS Management Services Limited Partnership; Roundhill I, LP v. Amwins Brokerage of Georgia, LLC; CJW & Associates, Inc.; Certain Underwriters at Lloyd’s

MCW&G recently received confirmation from the United States Supreme Court that a Ninth Circuit ruling in its favor would not be challenged by Writ of Certiorari. The case involves an Insured, a Washington entity, which filed suit in Washington federal court against certain Lloyd’s Underwriters and CJW & Associates, Inc., the third-party claims administrator for Lloyd’s Underwriters, among others, over a dispute concerning coverage for Hurricane Harvey-related flood damage to the Insured’s residential development in Houston, Texas. At the center of the dispute is the proper calculation of the applicable deductible.

Insurers moved, pre-answer, to compel arbitration of the dispute pursuant to the Policy’s mandatory arbitration clause. The Insured opposed, arguing that the arbitration provision was not enforceable under a Washington law, RCW 48.18.200(1)(b), which bars the enforcement of binding arbitration clauses in insurance contracts. Insurers argued that the Washington state law was preempted by the Convention on the Recognition of Foreign Arbitral Awards, an international treaty implemented by a Congressional statute that requires US courts to enforce arbitration provisions in contracts between international entities. The Insured countered that position by arguing that the McCarran-Ferguson Act, which provides that state insurance law preempts conflicting federal law, reverse-preempts the Convention, mandating that the Washington statute govern.

The Washington district court held that the Convention was not preempted by RCW 48.18.200(1)(b) under the McCarran-Ferguson Act, and thus, the Washington law invalidating arbitration clauses in insurance policies did not apply. The Court’s decision hinged on its finding that the McCarren-Ferguson Act does not apply to the relevant section of the Convention, because it is self-executing and not an “Act of Congress.”

The Insured appealed the ruling to the Ninth Circuit, which upheld the District Court decision in August 2021. The Insured thereafter sought a Writ of Certiorari from the United States Supreme Court, arguing that there was a split of authority among a number of Circuit courts. The Supreme Court denied the Writ on January 18, 2022, and the case is now headed to arbitration.

Partner Jeffrey Weinstein represented Certain Underwriters at Lloyd’s and CJW & Associates, Inc.

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