Surplus Lines Carrier Can Force Arbitration in Louisiana Despite Statute Limiting Arbitration
The federal district court granted the surplus lines insurer's motion to compel arbitration despite a Louisiana statute barring policies from depriving courts of jurisdiction in cases against insurers. Queens Beauty Supply, LLC v. Indep.Specialty Ins. Co., 2023 U.S. Dist. LEXIS 195372 (E.D. La. Oct. 31, 2023).
Hurricane Ida damaged property leased by Queens. Queens filed suit against its insurer, Independent Specialty Insurance Company (ISIC) for breath of contract and bad faith for failing to pay the full amount Queens contends it was owed for the damage. ISIC moved to compel arbitration.
Queens argued that ISIC waived its right to enforce the policy's arbitration clause by its actions before the court, including failing to opt-out of the settlement program adopted for Hurricane Ida cases. The court disagreed, ISIC had taken no overt act that evidenced a desire to resolve the instant dispute through litigation rather than arbitration. ISIC asserted as an affirmative defense that Queens's claims were barred by the arbitration clause in the policy. ISIC then participated in the settlement program for Hurricane Ida cases, which evidences a desire to settle the dispute, not to resolve it by litigation. Therefore, ISIC had not waived its right to arbitrate.
Queens next argued that arbitration clauses in insurance policies were prohibited under Louisiana law. The statute barred policies from depriving he courts of jurisdiction or venue of action against the insurer. The statute, however, did not prohibit a forum or venue selection clause in a policy form that was not subject to approval by the Department of Insurance. Under Louisiana law, surplus lines policies were not subject to the approval of the Louisiana Department of Insurance. Thus, the key question was whether the arbitration clause that ISIC sought to enforce was a "forum or venue selection clause." If so, the arbitration cause was binding. If not, the arbitration clause was prohibited by the statute and could not be enforced.
The court turned to prior decisions within the district holding that the United States Supreme Court had repeatedly recognised that an arbitration agreement was a specialised kind of forum-selection clause. Therefore, although generally prohibited in policies, the statue allowed surplus lines insurers to include form and venue selection clauses in their policies. Louisiana courts recognised arbitration clauses as a type of forum selection clause. Surplus lines insurers were thus not prohibited from including arbitration clauses in their policies. Therefore, the arbitration clause in ISIC's policy was binding and enforceable.
