Surplus Lines Carriers Cannot Compel Arbitration in Louisiana

    The court denied the surplus lines insurer’s motion to compel arbitration based on Lousiana’s law prohibiting arbitrations of coverage disputes. Fairway Village Condominiums v. Independent Spec. Ins. Co., 2023 U.S. Dist. LEXIS 62135 (E.D. La. April 20, 2023).

    The plaintiff’s condominium complex was damaged by Hurricane Ida. A claim was filed with the insurer. The insurer made an initial advance payment of $200,000. Three additional payments were made bringing the total to $951,462.49, which was less than half of the proof of loss amounts submitted by plaintiff. 

    Plaintiff sued the insurer for breach of contract and bad faith. The insurer filed a motion to compel arbitration based upon an arbitration provision in the policy. Recognizing that Louisiana law prohibited enforcement of a policy’s arbitration clause, the insurer argued it did not apply because it was a surplus lines carrier.

    The court ruled it could not enforce the arbitration provision because under the Louisiana statute, it was a “condition, stipulation or agreement” that deprived courts of jurisdiction over the coverage actions. The insurer’s status as a surplus line insurer did not change this analysis. Numerous courts had found that the statute was an anti-arbitration provision, voiding the efects of compulsory arbitraiton provisions in policies as contrary to public policy. Therefore, ordering arbitration was inappropriate in this case.