Stay of Coverage Case Appropriate While Court Determines Arbitrability of Dispute

    The Fifth Circuit vacated a discovery order issued by the district court and remanded the case for issuance of a stay while the arbitrability of the coverage dispute was reviewed. Cameron Parish Recreation #6 v. Indian Harbor Ins. Co., et al., 2024 U.S. App. LEXIS 3804 (5th Cir. Feb. 19, 2024).

    The plaintiffs purchased surplus lines polices from various insurance companies to provide coverage for commercial properties. The policies included an arbitration provision for resolving any disputes. After plaintiffs were denied coverage for damage to their properties from Hurricane Laura, they sued the insurers. The insurers filed motions to compel arbitration and to stay the case. The district court refused the stay and ordered limited discovery into arbitrability. The insurers appealed.

    The Fifth Circuit concluded that discovery was not needed to determine whether there was a valid agreement to arbitrate because the dispute could be decided as a matter of law. 

    Because the district court did not expressly address whether arbitration was proper, the Fifth Circuit remanded to give the district court the first instance and have it determine whether to grant arbitration based upon the policy. Therefore, the discovery order was vacated and the case was remanded for the district court to immediately grant a stay of the case pending its decision on arbitration.