Certain Underwriters at Lloyds, London v. 3131 Veterans Blvd LLC; MPIRE

At a glance

Parties

Certain Underwriters at Lloyds, London, Indian Harbor Insurance Company, QBE Specialty Insurance Company, Steadfast Insurance Company, General Security Indemnity Company of Arizona, United Specialty Insurance Company, Lexington Insurance Company, HDI Global Specialty SE, Old Republic Union Insurance Company, GeoVera Specialty Insurance Company and Transverse Specialty Insurance Company (petitioners-appellants) v. 3131 Veterans Blvd LLC and Mpire Properties LLC (respondents-appellees)

Case no.

United States Court of Appeals for the Second Circuit, Docket Nos. 23-1268-cv, 23-7613-cv

Forum and rules

US federal court proceedings to compel arbitration under the Federal Arbitration Act (9 U.S.C. § 201 et seq.) and Article II Section 3 of the New York Convention; arbitration clause with seat in New York

Treaty

Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), adopted 10 June 1958

Court

Second Circuit: Gerard E. Lynch (author of the opinion), Robinson and Merriam, Circuit Judges

Underlying award(s)

None. The appeals were from two decisions of the US District Court for the Southern District of New York, by Judge Preska (15 August 2023) and Judge Abrams, that denied petitions to compel arbitration.

Sector

Insurance; surplus lines property insurance; hurricane damage

Outcome

The Second Circuit held that Article II Section 3 of the New York Convention is self-executing and cannot be reverse-preempted by Louisiana law under the McCarran-Ferguson Act. It abrogated Stephens I on this point, reversed both district court decisions to the extent they relied on it, and remanded (8 May 2025).

The dispute

Surplus lines insurers at Lloyd's, London issued policies on commercial properties in Louisiana that were damaged by Hurricane Ida in August 2021. 3131 Veterans Blvd LLC and Mpire Properties LLC bought the properties after the hurricane and took assignments of the policies. Both policies contain an identical arbitration clause, with the seat in New York and New York law as the proper law. The insureds sued some of the insurers in Louisiana state court, and the insurers petitioned in the Southern District of New York to compel arbitration and to enjoin the state suits. The insureds argued that La. R.S. § 22:868 voids arbitration clauses in insurance contracts and that, under the McCarran-Ferguson Act (15 U.S.C. § 1012(b)), this Louisiana law reverse-preempts the FAA and the New York Convention, which the Second Circuit had held not self-executing in Stephens v. American International Insurance (Stephens I).

Key holdings

1. Louisiana law prohibits arbitration clauses in insurance contracts, including surplus lines policies. The 2020 amendment adding La. R.S. § 22:868(D) did not create an exception for arbitration clauses, as the Louisiana Supreme Court held in Police Jury of Calcasieu Parish v. Indian Harbor Ins. Co. The insurers conceded that this decision foreclosed their argument. pp. 9–10
2. The FAA, and the delegation principles derived from it, are reverse-preempted by Louisiana's anti-arbitration law under the McCarran-Ferguson Act. The court therefore could not send the gateway question of whether the clauses are void to the arbitral tribunal, even though the clauses refer disputes over "validity" to arbitration. pp. 12–14
3. State law can reverse-preempt a treaty provision under the McCarran-Ferguson Act only if the provision depends on an Act of Congress, that is, if it is not self-executing. Stephens I looked only at the existence of implementing legislation for the Convention as a whole. Its reasoning has been fatally undermined by Medellín v. Texas, which requires a provision-by-provision analysis. pp. 15–20
4. Under the Medellín factors, Article II Section 3 is self-executing. It is a directive to domestic courts that they "shall" refer the parties to arbitration. Articles I(3) and II(1), which leave scope questions to domestic law, do not conflict with this reading for commercial agreements. The insureds showed no evidence that the drafters or the political branches intended Article II Section 3 to be non-self-executing, and the US Executive's amicus position that it is self-executing deserves great weight. pp. 20–26
5. Article II Section 3 therefore cannot be reverse-preempted by Louisiana law. The court abrogated Stephens I to that extent, reversed the district courts' decisions so far as they relied on it, and remanded both matters for further proceedings. The opinion was circulated to all judges of the Court before filing. p. 26

Procedural history

1. August 2021Hurricane Ida damages the insured commercial properties in Louisiana.
2. 15 August 2023Judge Preska (S.D.N.Y.) denies the insurers' petition to compel arbitration against 3131 Veterans, relying on Stephens I, and denies the petition to enjoin the state court action as moot.
3. September 2023Judge Abrams (S.D.N.Y.) denies the petition to compel arbitration against Mpire on the same reasoning.
4. 17 September 2024Oral argument in the Second Circuit.
5. 2024A few weeks after oral argument, the Louisiana Supreme Court decides Police Jury of Calcasieu Parish v. Indian Harbor Ins. Co., upholding the prohibition of arbitration clauses after the 2020 amendment.
6. 8 May 2025Second Circuit opinion: Article II Section 3 of the New York Convention is self-executing; Stephens I is abrogated in part; both decisions are reversed and the matters remanded.

Tribunal, counsel and experts

Decided by

• Gerard E. Lynch Judge, United States Court of Appeals for the Second Circuit (author of the opinion)

For the claimant

Mound Cotton Wollann & Greengrass LLP

For the respondent

The Voorhies Law Firm

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Keywords

• New York Convention Article II(3)
• self-executing treaty
• McCarran-Ferguson Act
• reverse preemption
• Medellín v. Texas
• Stephens v. American International Insurance
• motion to compel arbitration
• Louisiana anti-arbitration law
• La. R.S. § 22:868
• surplus lines insurance
• Lloyd's
• Hurricane Ida
• delegation clause
• arbitrability
• Federal Arbitration Act
• Green Enterprises v. Hiscox
• CLMS Management Services v. Amwins
• insurance arbitration

Summary generated with AI from the published documents — refer to the award for the authoritative text.