CLMS Mgmt. Servs. Ltd. P’ship v. Amwins Brokerage of Georgia, LLC, No. 3:19-CV-05785-RBL, 2019 WL 7185547 (W.D. Wash. Dec. 26, 2019)

This case concerned the enforcement of an arbitration clause in an insurance policy. The insured, a Washington entity, filed suit in federal court against Certain Underwriters at Lloyd’s, London and CJW & Associates, Inc., the third-party claims administrator for Underwriters, over a dispute concerning coverage for Hurricane Harvey-related flood damage to the insured’s residential development in Houston, Texas. Underwriters moved to compel arbitration pursuant to the policy’s mandatory arbitration clause.

The insured took the position that a Washington statute, RCW 48.18.200(1)(b), barred the enforcement of binding arbitration clauses in insurance contracts. Underwriters countered 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 U.S. courts to enforce arbitration provisions in contracts between international entities. The question for the court was whether the McCarran-Ferguson Act (which provides that state insurance law preempts conflicting federal law) reverse-preempts the Convention, mandating that the Washington statute govern. While this issue had been addressed in other jurisdictions, it was a case of first impression for the Washington court. There is a split in the Circuit courts as to whether the McCarran-Ferguson Act can preempt the Convention, and no court in the Ninth Circuit had yet ruled on the issue.

The court ultimately held that the Convention was not preempted by RCW 48.18.200(1)(b) under the McCarran-Ferguson Act and that the Washington state statute 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 court granted Underwriters’ motion to compel arbitration and to stay the proceedings, and further held that the insured’s claims against CJW, the third-party administrator which was not a party to the insurance contract, would also be sent to arbitration because of CJW’s relationship to Underwriters, which the court found to be an agency relationship.

CJW and Certain Underwriters were represented by partner Jeffrey S. Weinstein.