Automated Summary
Key Facts
Belmont Commons, L.L.C. and Belmont Delaware, L.L.C. own a luxury property in New Orleans that was damaged by Hurricane Ida on August 29, 2021. They held a surplus lines insurance policy with multiple insurers covering named windstorm damage. After insurers denied the claim as damage was below the $1,464,000 deductible, Belmont sued for breach of contract and bad faith while also demanding arbitration. The insurers moved to compel arbitration under the policy's arbitration clause. The Fifth Circuit affirmed the district court's order compelling arbitration, ruling that Louisiana's statutory bar on arbitration clauses in insurance contracts contains a carve-out for surplus lines insurers, making the arbitration clause enforceable.
Transaction Type
Surplus lines insurance policy covering property against named windstorm damage
Issues
- Whether the Louisiana statutory prohibition on arbitration clauses in insurance contracts (LA. R.S. § 22:868(A)) applies to surplus lines insurers given the carve-out provision in LA. R.S. § 22:868(D) that exempts surplus lines insurers from certain statutory requirements
- Whether arbitration clauses are considered forum or venue selection clauses under LA. R.S. § 22:868(D) and thus fall within the carve-out for surplus lines insurers, exempting them from the prohibition on arbitration clauses in insurance contracts
Holdings
The Fifth Circuit affirmed the district court's order compelling arbitration in a first-party insurance dispute involving Hurricane Ida storm damage claims. The court held that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards requires arbitration with foreign insurers, and that Louisiana's statutory bar on arbitration clauses in insurance contracts does not apply to surplus lines insurers because arbitration clauses qualify as venue selection clauses under LA. R.S. § 22:868(D). All eleven insurers, both domestic and foreign, may enforce the Policy's arbitration clause.
Remedies
The Fifth Circuit affirmed the district court's order compelling arbitration under the policy's arbitration provisions. The appellate court upheld the lower court's decision that all Insurers may enforce the Policy's arbitration clause.
Legal Principles
- The court applies the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which requires district courts to order arbitration if there is a written agreement to arbitrate, the agreement provides for arbitration in a Convention signatory territory, the agreement arises from a commercial legal relationship, and a party to the agreement is not an American citizen.
- The court interprets LA. R.S. § 22:868(D) which creates a carve-out for surplus lines insurers' forms not subject to approval by the Louisiana Department of Insurance. The court concludes arbitration clauses are a type of venue selection clause under Louisiana law, meaning the prohibition on arbitration clauses in LA. R.S. § 22:868(A) does not apply to the surplus lines policy.
- Grigson estoppel allows a nonsignatory to compel arbitration when the signatory to the contract containing an arbitration clause raises allegations of substantially interdependent and concerted misconduct by both the nonsignatory and one or more of the signatories to the contract.
Precedent Name
- Safety National Casualty Corp. v. Certain Underwriters at Lloyd's, London
- Grigson v. Creative Artists Agency L.L.C.
- Ginter ex rel. Ballard v. Belcher, Prendergast & Laporte
- Hodges v. Reasonover
Key Disputed Contract Clauses
The insurance policy contains an arbitration clause requiring all matters in difference between the Insured and the Companies to be referred to an Arbitration Tribunal seated in New York, applying New York law, and prohibiting exemplary, punitive, multiple, consequential, or other damages of a similar nature. The clause also includes allocation language stating the contract shall be constructed as a separate contract between the Insured and each Underwriter.
Cited Statute
- Louisiana Revised Statutes Section 22:868(A)
- Louisiana Revised Statutes Section 22:868(D)
- Louisiana Revised Statutes Section 22:446(A)
Judge Name
- District Judge Hanks
- Circuit Judge Stewart
- Chief Judge Richman
Passage Text
- The Louisiana Supreme Court has characterized arbitration clauses as a type of venue selection clause, which means the carve-out in LA. R.S. § 22:868(D) that exempts surplus lines insurers from forum selection restrictions also applies to arbitration clauses.
- The court's holding that surplus lines insurers may enforce the Policy's arbitration clause because they fall within the Louisiana statutory carve-out, regardless of whether the statute prohibits arbitration clauses in insurance contracts.
- The court's final conclusion that all insurers (both foreign and domestic) may enforce the Policy's arbitration clause because they are all surplus lines insurers, regardless of Louisiana's statutory prohibition on arbitration clauses in insurance contracts.
Damages / Relief Type
Arbitration order compelling arbitration under the Policy's arbitration clause